Sse Share Discussion Threads

[marktime1231] 02/10/2023 22:26

As a former lifelong customer of Southern Electric / SSE and briefly while rebranded Ovo I am well aware that this is no longer a retail energy supplier. Nor have I said that, not recently and not since your last post in February 2022. But seriously thanks for popping in.

You have misread or misunderstood something. Its been about reconsidering the fortunes and outlook for SSE as it has shifted away and is further shifting from its old business model to being an adventurous asset developer. After a good start realising gains by selling stakes in some developments things are looking tougher and its not just the cost of capital. It may succeed with its new strategy, but the compensation we get for the greater risk by way of dividend is nothing like it used to be when SSE was a steady boring regulated operator and retailer banking the cash.

Rationalising my July decision to bail out in the £18s as things unfold, and watching closely to see how far back it might fall, might re-entry be attractive at some stage. Today was rotten, lots of good stocks bashed hard, but I do wonder if SSE is heading down further.

[bobby12340] 02/10/2023 19:22

Marktime 1231 you are seriously out of date stating SSE is a retail energy supplier.

That side of the business was sold to OVO many years ago.

It was 5% of the profit 95% of the problems.

[marktime1231] 05/9/2023 12:51

You may be right but my conclusion is that the outlook for SSE is getting more difficult having enjoyed a good run. The increasing risks are not priced in if, as you say, the recent fall back from £19 is just down to the macro economic cycle of higher gilt rates. It does not help SSE share price cutting yield by a third, something which compensated for the risk.

A few months delay in completing the Seagreen wind farm off Angus. SSE will be facing the same delay and cost problems everyone else is declaring, surely? In the long run SSE will no doubt end up a winner but the process of creating value from developments suddenly looks tough.

We will see, the results of AR5 are due to be announced at the latest by the end of this week and will tell a story about who is still aggressively pursuing offshore wind opportunities.

[mrscruff] 04/9/2023 18:32

marktime1231 the points you raised are all factored into the price, but the fall is 100% due to the rising risk free rate is driving all these prices downwards and so if you believe rates will keep rising and stay high forever then sell. I believe rates will have to fall. History shows this to be true. This is a strong buy.

[2tantan] 31/8/2023 21:21

Can’t figure is this site to help make money or save the planet

[marktime1231] 31/8/2023 17:14

If the strike price has to rise to make wind farm development viable so be it.

The intermittency of wind is already built in to the economics with load factors of around 40%, but the cost and difficulty of network enhancement and storage was not at the forefront of policy thinking when Boris committed to 50GW offshore by 2030, the buffoon was claiming that renewables offered surplus capacity at zero marginal cost.

The Daily T is a bit wild and unbalanced in some of its writing. No mention of interconnectors, the potential of hydrogen, the prospect of adding hydro or other forms of storage etc. And of course there will be abundant lithium for batteries, in due course every household will have several kWh parked on the driveway and to some extent the peak demand problem will be solved by intelligent pricing and remote management of this virtual distributed battery.

But yes, there are serious problems facing wind farm developers, and when you add network and storage costs the price of renewable electricity is not necessarily cheaper than fossil fuel. That does not mean we can continue to fry the planet with coal and gas. It just means we have to pay the price.

SSE is facing huge problems with its new business model of being a global renewables asset developer versus the old cash-cow model of energy generator, retail supplier and regulated asset operator. After a good run the risks suddenly look like they outweigh the opportunities. Happy to have divested here.

A door may have opened though with news that the EUs policy of throttling the return which developers can make on upgrading regulated networks has been ruled unlawful, and the likes of NG and SSE have a similar complaint here.

[peterangler] 31/8/2023 08:57

Thanks for that, interesting article and food for thought

[jrphoenixw2] 30/8/2023 14:03

I was wondering what whacked the px this morning...

Telegraph, this lunchtime:
' The real costs of wind power prove the sums don’t add up
The chasm between net zero ambition and reality is growing ever larger

Someone get a grip. UK energy policy is once again coming apart at the seams, with growing doubts over whether net zero or even energy security goals can be met.

Only now are the true economic costs and practical difficulties of going carbon-free becoming fully evident, and it’s not a pretty sight. Yet still policymakers don’t seem to get it; either that or they are being deliberately misleading on the ease with which it can be delivered.

All pretence at “leading the world” in the application of renewables is meanwhile going up in smoke, as one-time champions pare back their ambitions for the UK market in the face of rising costs, oppressive planning laws, and better opportunities elsewhere. Rival jurisdictions, particularly the US and EU, are beginning to offer far superior incentives.

If you cannot beat them, do the opposite. Slowly, but surely, the Government is watering down its environmental agenda, which sadly but inevitably frequently clashes with the parallel goal of enhanced economic growth – the latest example being so-called “nutrient neutrality” water pollution rules which act as a barrier to more housebuilding.

Yet on paper at least, and indeed legally, the overarching environmental goal of net zero by 2050 – together with the staged targets set for getting there – remains sacrosanct, even though most practically minded people have long thought there is not a snowball’s chance in Hades of actually meeting it. A giant leap of faith in the transforming powers of technology is demanded to think it can be.

As if to confirm the gaping chasm between ambition and reality, the latest round of auctions for UK renewable energy licences, the outcome of which is due to be announced late next week, has plainly hit the rocks. Having already abandoned a key UK offshore wind development because of rising costs, the Swedish utility Vattenfall has indicated that it won’t be participating in the Government’s so-called Auction Round Five.

Similarly with the UK energy group SSE, which has said it will not be entering its Seagreen offshore development into the auction, citing a low, officially set, strike price, and dramatically rising costs. Under pressure from the renewables industry, the Government has announced a slight increase in the promised subsidy below strike prices, but it’s unlikely to make a difference.

Presumably there are at least some bidders still in the running; even so, officials will struggle to get the capacity hoped for, putting in jeopardy the target of 50GW of offshore wind by 2030. Current capacity stands at just 14GW, so there is a way to go.

This in turn raises doubts about the Government’s separate target of complete decarbonisation of the electricity network by 2035. This, too, looks unrealistic. British energy policy is once more in a chaotic mess. It was ever thus. As it is, policymakers have set strike prices so low that investors are struggling to see how they might make a return. No surprise that prices should be forced down like this, for the green energy transition is not just about saving the planet. It is also meant to deliver much lower energy costs.

This, too, is turning out to be a pretence. It’s true that in the past seven or eight years, the notional cost of renewable energy has plummeted. The price of offshore wind output has, for instance, fallen by around two thirds, from £100 per megawatt hour to less than £40. There you go, say ministers in response to net zero sceptics; it’s cheaper than coal.

Would that it was, but the claim is in fact a statistical illusion. The manufacturing, installation and maintenance costs alone have been surging since the war in Ukraine. To these we must also add the costs of upgrading the National Grid to bring the new sources of electricity from where they are generated to where they are used.

Littering the countryside with pylons is understandably running into local opposition. Billions may have to be forked out to compensate affected communities, or in finding alternative, more expensive, transmission routes. It could make HS2 look cheap by comparison.

But to gain a proper understanding of the real costs of wind, and to a lesser extent, solar, we need to factor in another of their characteristics – that they are intermittent. In order to function effectively, the grid needs a constant balance between supply and demand; if the wind isn’t blowing, or even if it is blowing too strongly, thereby overloading the grid, there is a problem.

Lots of conventional backup capacity is required to deal with the shortfalls that result from intermittency – capacity that can be brought online quickly at the flick of a switch when needs arise. The upshot is likely to be a high degree of duplication in generating capacity. This will obviously very considerably add to the costs of the renewable element. It’s disingenuous to say wind is cheaper than fossil fuels.

Potentially, storage could provide a solution to the intermittency problem, yet for the moment it doesn’t exist at the scale needed to do the trick. If Britain cannot guarantee to keep the lights on, nobody is going to want to set up shop here.

What about batteries? This may seem unduly pessimistic, but it stretches credulity to believe that they can ever really be the solution. Is there even enough lithium in the world to provide the level of battery power needed to supply the National Grid when the wind stops blowing? There are alternatives, nuclear being the most obvious, but many environmentalists are as opposed to it as they are to coal, gas and oil, and here in the UK, policy on new nuclear capacity, as on much else, falls woefully short.

It is as much as we can do even to get the money-eating leviathan of Hinkley Point C up and running. Next comes Sizewell C, which scarcely promises to be much better. As Britain’s ageing fleet of existing nuclear power stations reaches the end of its life, merely replacing what’s closing down seems to be beyond us.

And to phase out the 80pc of UK energy demand currently satisfied by fossil fuels, we would need far, far more. Yet the Government continues to procrastinate. Shamefully, it is still faffing around with an international competition to decide who gets to build Small Modular Reactors, never mind how to finance them.

The last two auction rounds lulled the Government into a false sense of security on the economics of renewables. Both were hugely successful in attracting bidders at apparently highly competitive prices. But things have changed. Having been ahead, Britain is slipping behind. Next week’s announcement on the outcome of the fifth round auction threatens to be a rude awakening.

[bountyhunter] 21/8/2023 19:02

And dividend corrections ;)

I'll take 67.7p - corrected :)

[2tantan] 21/8/2023 18:04

Skinny is great. He is always available with advice and clarification

[peterangler] 17/8/2023 16:23

Thanks Skinny for another interesting post. Can only hope the share price reflects the long-term potential before roo long.

[2tantan] 05/8/2023 23:56

Big drop. Then again Scotland hope to win World Cup!!!

[bountyhunter] 02/8/2023 18:00

The 67p dividend and dates are in the header.

[wad collector] 27/7/2023 15:00

Apologies.

[clampit] 27/7/2023 08:52

Wad collector. I think the Div is actually 67.7p.

[wad collector] 27/7/2023 08:26

Yep, rising to the Xd date only makes sense on a gradual basis from the last Xd date. Though minor advantages of funds/individuals who don't pay dividend tax is small.
Down rather more than the 57.7p today so far.

[pierre oreilly] 25/7/2023 09:46

I don't understand this new phenonium of the price supposedly rising before the xd date. Why, and for what reason should it? I've been investing a while and never seen that as a given. Going xd is completely zero sum.

The yeild on last year is nearly 5%, with the increase this year will probably rise if the share price doesn't. And the company can't 'reset the yield to 3-4%' even if it wanted to. I thought it had a very progressive divi strategy since the rebasing iirc well over a year ago now.

Imv, the time to exit this is when the windmill hype recedes along with the subsidies ... but that appears a long way off to me.

[marktime1231] 24/7/2023 17:45

The share price not climbing as hoped towards ex-div, but today I decided to cash out the final tranche of the stake built up in the £13-14s during lockdown. Banking the gain rather than taking the dividend.

Why when SSE has always been a steady part of my portfolio, and is a solid bet on energy infrastructure?

Not just because I expect the share price will fall further than the payout. SSE are unlikely to repeat last winter's phenomenal income from gas thermal generation, and wind revenues continue to undershoot. Vattenfall warning of runaway costs facing all offshore wind developers. And SSE are pivoting from income cash cow to asset developer. Resetting the dividend to 3-4% is the clincher though, as an income investor that sort of yield does not put dinner on the table.

[bountyhunter] 20/7/2023 07:36

Cheers 188BT. I've had my eye on NextEnergy but it took a bit of a dip on results recently.

[18bt] 20/7/2023 07:29

Bluefield Solar, Foresight Solar, NextEnergy Solar, US Solar. Some have exposure to wind and ex-UK in addition to UK sites.