SSE will invest a further £12.5bn in green power over the next five years, after it rejected calls yesterday from activist investor Elliott Management to spin off its renewables arm.
Elliott Management has been pushing SSE to separate its renewables business, since taking a stake in the operator in September.
The UK energy firm will instead increase its annual capital expenditure in renewables by £1bn over its previous spending programme, and expand its renewable power capabilities five-fold to 50 terawatt hours a year by 2031 as part of new net zero plans.
The £12.5bn investment reflects a 65 per cent increase in annual spending on its previous strategies and over 2.5 times more capital than currently allocated to renewables growth.
The British energy firm is funding its new investment plans through a 20p dividend cut by 2023/24 and by selling a 25 per cent minority stake in its electricity networks business.
Sir John Manzoni, SSE’s chair, said the board has “carefully considered a range of strategic alternatives” but has decided to push forward with further renewable investment to ensure the company remained a key player in the UK energy market.
He said: “The board believes these plans represent the optimal pathway for SSE, positioning it as the UK’s clean energy champion with the scale to enable the delivery of over 25 per cent of the UK’s 40GW offshore wind target and over 20 per cent of upcoming UK electricity networks investment, deploy flexibility solutions to keep the lights on, whilst exporting its renewables capabilities overseas. SSE is creating long-term value for all of our stakeholders.”
The markets have reacted negatively to the decision and the future dividend cut with shares down 4.28 per cent on the FTSE 100 at close of play.
Despite the tumbling share prices, SSE could be comforted by strong first half-year results with operating profits rising from £328.9m to £376.8m.
Earnings per share have summarily risen from 7.3p to 10.5p.
The company turned its focus to renewable power and networks after selling its household energy supply and services arm to OVO Energy at the beginning of 2020.
Alongside its renewable investments, it owns the main electricity grid in the north of Scotland, local networks in areas of England such as Oxfordshire and assets including gas-fired power stations.
SSE’s revived investment in sustainable energy sources follows the COP26 climate summit in Glasgow, where countries pledged to “phase down” coal usage and reach net zero carbon emissions.