SSE shares hit record as it lifts earnings forecast

Shares of Perth-based renewable energy and power networks giant SSE touched a record high over £17 a share on Tuesday after the company raised its annual earnings projections for the second time in two months on the back of strong performance at its thermal and hydro plant operations.

SSE said it has received almost £1.3 billion in proceeds after completing the disposal of its investment in Scotia Gas Networks.

SSE shares are up about 17% for the past 12 months, giving the Perth company a stock market value of about £18 billion and making it the largest listed firm run from Scotland when measured by market capitalisation, ahead of Baillie Gifford’s Scottish Mortgage Investment Trust.

Citigroup analyst Jenny Ping said: “Backed by a credible financing strategy, visible dividend, and potentially meaningful earnings upgrades to come, we see SSE as in a sweet spot to benefit.”

In a trading update, SSE said: “Since SSE’s Q3 Trading Statement, weather conditions have meant that the shortfall in output from renewable sources has decreased from 19% below plan for the nine months to 31 December 2021, to around 12% below plan as at 22 March.

“At the same time, the good performance from flexible thermal and hydro plant has continued in volatile market conditions, demonstrating its value to the energy system.

“In light of this, SSE is updating the market that it expects full-year 2021/22 adjusted earnings per share to be in a range of between 92 and 97 pence compared to previous guidance of at least 90 pence.

“SSE still intends to recommend a full-year dividend of 81p per share plus RPI for 2021/22 and continues to target an RPI linked dividend in 2022/23, followed by a rebase to 60p in 2023/24 and at least 5% increases in 2024/25 and 2025/26.

“SSE also remains on track to report full-year 2021/22 capex in excess of £2bn as it continues to execute its strategic £12.5bn Net Zero Acceleration Programme, launched in November, at pace.

“With completion of the disposal of its investment in Scotia Gas Networks (SGN) on 22 March for cash proceeds of £1.3bn, adjusted net debt is expected to be below £9bn at 31 March 2022.”

SSE added: “In response to the devastating humanitarian cost of the Russian invasion of Ukraine, SSE has donated £1m to the Disasters Emergency Committee.

“SSE does not have any energy supply contracts with Russian counterparties, and we are ceasing trading activities with these entities.

“The war has had significant consequences for energy markets and policy, contributing to historically high and volatile prices.

“However, SSE has so far been served well by its prudent hedging approach and has successfully managed any increasing credit and collateral requirements.

“The impact of a prolonged or escalated conflict on SSE’s businesses is difficult to predict.

“In any event, SSE benefits from the breadth of its businesses across the energy value chain which balances risk in periods of volatility and its £12.5bn net zero aligned investment programme is helping to reduce system reliance on imported gas.”

SSE finance director Gregor Alexander said: “SSE’s integrated and balanced business model has performed well in turbulent market conditions, with expected financial performance now broadly aligning with our internal projections at the beginning of the year.

“At the same time, we have made further progress with the SGN disposal and we have a number of attractive options to support accelerated electrification of the economy.

“Our significant investment programme will make a huge contribution towards both net zero and energy security whilst publication of our Net Zero Transition Plan gives stakeholders more detail on how we will decarbonise our businesses.”

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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.