SSE mulls SGN stake sale amid £200m Covid hit

Perth-based renewable energy and networks giant SSE plc said on Tuesday it has appointed banks to review options for divestment of all or part of its roughly 33% stake stake in SGN — formerly Scotia Gas Networks.

SSE said it will decide “on approach and timings before the end of this financial year” on the potential sale.

The news came in a trading update for SSE’s third quarter to December 31 that said it still expects full-year 2020-21 adjusted earnings per share “will be in the 85 pence to 90 pence range” based on the following assumptions:

·      Normal weather conditions prevailing for the final three months of the year. For the nine months to 31 December 2020, renewables output was just over 5% below plan.

·      The impact of coronavirus on full-year operating profit being towards the middle of the £150m to £250m range originally estimated in SSE’s Full-year Results in June 2020.

SSE said it intends to recommend a full-year dividend of 80p per share plus RPI for 2020-21 and continues to target annual RPI increases to 2023 as set out in its five-year dividend plan.

SSE said good progress is being made on its five-year, £7.5 billion investment and capital expenditure plan.

“In November, financial close was reached on Dogger Bank A and B ahead of the 10% stake sale; and construction continues at Viking onshore and Seagreen offshore wind farms … ” said the group.

“The group is on track to realise in excess of £2bn from a disposals programme that is creating value and furthering SSE’s strategic focus on net zero.

“The completion of the sale of its Multifuel assets for £995m and the sale of its gas exploration and production assets in December underlined SSE’s ESG credentials and focus, whilst taking expected proceeds from agreed or completed disposals to over £1.5bn.

“SSE has appointed banks to review options for divestment of all or part of its stake in SGN and will decide on approach and timings before the end of this financial year.”

SSE finance director Gregor Alexander said: “With solid operational performance and strong strategic execution, SSE is well positioned as we move towards the end of our financial year.

“Our robust business model is mitigating the impact of coronavirus, our disposal programme is proceeding at pace and at Dogger Bank we have shown yet again that we can develop opportunities and create value from world-class assets.

“With a number of uncertainties lifting and an increasingly supportive policy environment which further underpins our clear strategic focus on the transition to net zero, SSE is on a strong strategic footing for the rest of 2020/21 and beyond.”

Brewin Dolphin senior investment manager Donald Brown said: “SSE continues to make progress in re-shaping its business, with a greater focus on renewables and the disposal of non-core assets.

“The ‘green recovery’ from Covid-19 prioritised by governments should play to SSE’s strengths and shareholders will be pleased to see continued commitment to RPI-linked dividend increases over the next couple of years – particularly with income remaining precarious elsewhere.

“The company’s shares are basically unchanged over the year, which is a decent barometer of its success in managing the many challenges of 2020 and compares favourably to the FTSE 100, which is down 11% since January 2020.”