SSE: ‘no decision to break up’ as hedge fund hovers

Perth-based renewable power and networks giant SSE finally responded on Monday to months of speculation that US activist hedge fund Elliott Advisors is pushing hard for a breakup of the group into two separate companies after buying up a small stake in the Scottish firm.

“There has been no decision to break up the SSE group,” said SSE, one of Scotland’s largest listed companies and biggest employers.

SSE’s clear strategic focus is on renewables and regulated electricity networks, supported by carefully chosen businesses …

“SSE is currently building more offshore wind than any company in the world, expanding internationally, and investing in the low-carbon electricity infrastructure that society needs.”

Some analysts said the move by Elliott is badly timed with the UK energy market currently in crisis as surging power and natural gas prices threaten supplies and push some smaller utilities to the brink of bankruptcy.

SSE’s CEO Alistair Phillip-Davies was involved in emergency talks with UK business minister Kwasi Kwarteng over the weekend to discuss how to help the customers of companies in trouble.

Nonetheless, John Musk, analyst at RBC Europe Ltd, wrote in a note that the statement by SSE “will do little to prevent Elliott from campaigning for a potential split of the businesses.”

Elliott has built up a small shareholding in SSE and is said to be putting pressure on SSE management to create higher value by splitting its renewables and networks businesses into two separate companies.

Morgan Stanley analysts said that under FSA rules, once Elliott’s stake reaches 3% of SSE it will have to disclose an interest within two business days.

In a stock exchange statement, SSE said: “SSE plc notes recent media speculation regarding plans to split the SSE Group.

“As outlined in May, SSE will provide an update on its plans to further accelerate growth in its portfolio with its half year results in November, including details of significantly increased capital investment for the period to 2026, sources of funding and the company’s vision for further growth into the 2030s.

“This will include ambitions for installed renewable and flexible capacity, as well as networks RAV projections.

“Following recent reshaping of the group, SSE’s clear strategic focus is on renewables and regulated electricity networks, supported by carefully chosen businesses.

“SSE’s businesses have exciting growth potential aligned with net zero targets and share common capabilities in the development, construction, financing, and operation of low-carbon electricity infrastructure.  

“SSE is currently building more offshore wind than any company in the world, expanding internationally, and investing in the low-carbon electricity infrastructure that society needs.

“There has been no decision to break up the SSE group.

“The board remains fully focused on strategic choices which will drive shareholder value from the wealth of net zero opportunities the company is creating.”

CEO Phillips-Davies said: We have been making excellent progress with our clear net zero-aligned strategy, centred on electricity networks, renewables and other carefully chosen businesses that help provide the low-carbon electricity infrastructure that government and wider society requires.

“SSE is the UK’s national low-carbon energy champion, delivering for both our shareholders and society and we look forward to updating investors on our plans to accelerate growth and create value in due course.”

AJ Bell Investment Director Russ Mould said: “It’s increasingly fashionable for companies to be broken up as activist investors put pressure on businesses to extract hidden value.

“Not every campaign works, but activists have a pretty good hit rate.

“SSE has already gone through some steps to streamline its operations with the sale of its retail energy division, but Elliott Management believes it can go further by selling its renewable energy operations.

“Having kept quiet for a while the market speculated on what might happen, SSE has now put out a statement saying there is no decision to break up its business.

“There are two ways to interpret this statement.

“On one hand, the words ‘there is no decision’ might imply that some consideration might still be given to a break-up – as in there is no decision yet.

“On the other hand, the company says it already has a clear strategy and has promised to give all the details on spending and the how this might drive growth at the half year results in November.

“It doesn’t want an activist investor getting in its way before investors have had a chance to digest the plan for future value generation.

“A lot of the big oil companies are in the market for renewable energy assets as they seek to transition away from fossil fuels, which means there would be eager buyers for SSE’s renewable energy operations.

“Activist investors are known for their persistence so one can be sure that Elliott won’t give up following the energy group’s latest statement.”

About the Author

Mark McSherry
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.