SSE sees ‘small’ gain in £120m North Sea gas sale

SSE plc, the Perth-based renewable energy and networks giant, said on Tuesday it agreed to sell its portfolio of gas exploration and production (E&P) assets to Viaro Energy via its subsidiary RockRose Energy Limited for up to £120 million.

As part of the transaction, SSE said it “will retain an obligation” to pay 60% of decommissioning costs.

The net present value of estimated decommissioning costs is £390.1 million.

SSE said it currently expects to make a “small gain” on the sale.

The Perth firm said the sale “clearly comes at a difficult time for the E&P sector, and the economy as a whole, but we believe it is the right move for our shareholders” as SSE focuses its resources on its core low-carbon businesses.

SSE said the £120 million price comprises £25 million in cash, payable at completion, with the remainder, adjusted for leakage, “forming a vendor loan (repayable three years from completion accruing interest at 7.125%).”

An additional consideration of up to £40 million is payable if the gas price in H2 2021 reaches agreed thresholds.

“The transaction is based on a ‘locked box’ economic date of 31 March 2019 and is subject to regulatory approval and partner consent,” said SSE.

The diverse portfolio comprises non-operational equity shares in over 15 producing fields in three regions in the North Sea: the Easington Catchment Area, the Bacton Catchment Area, and the Greater Laggan Area.

As part of the transaction, SSE will retain an obligation to pay 60% of the decommissioning costs, payable as the decommissioning of the assets occurs.

SSE has stated for some time that its financial investment in E&P assets is a non-core activity and ultimately not aligned with its strategic focus on reaching net-zero emissions.

“This sale is part of SSE’s strategy to refocus its investment on its core networks and renewables businesses, with plans to invest £7.5bn in low-carbon energy infrastructure over the next five years and to treble its renewable electricity output by 2030.

The company has so far secured over £1.4bn from the disposal of non-core assets as part of its £2bn-plus disposal programme by autumn 2021.

“Today’s announcement follows recent agreements to sell its share in energy-from-waste venture Multifuel Energy Limited for £995m, its non-operating stake in Walney Offshore Wind Farm for £350m, and its equity interest in meter asset provider MapleCo for £90m.”

SSE finance director Gregor Alexander said: “We have said for some time that gas exploration and production assets are inconsistent with our future ambitions and vision to be a leading energy company in a net-zero world.

“This sale clearly comes at a difficult time for the E&P sector, and the economy as a whole, but we believe it is the right move for our shareholders as we focus our resources on our core low-carbon businesses.

“It represents further progress on our strategy to dispose of non-core assets as we look to invest £7.5bn in essential low-carbon energy infrastructure over the next five years, driving the UK’s transition to a net-zero future.”

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Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.