SSE disposals boost profits as it steps up low carbon investment

Energy group SSE reported operating profits up 185% to £2.74bn on the back of its disposals programme which delivered £877.6m of exceptional net gains.

The Perth-based FTSE 100 group reported profits before tax up 328% to £2.52bn, as the Covid-19 impact on operating profits – estimated at £170m – came in towards the lower end of the expected range.

Its adjusted earnings per share increased 5% to 87.5 pence, within the expected 85-90p range.

The group also confirmed that it expects to start a sale process for all of its 33% stake in gas network operator SGN during the summer, which it hopes will be concluded before the end of the calendar year.

SSE plans to invest around £2bn largely in low carbon projects this year and is weighing up further investments as the UK prepares to host COP26 in November.

It has created more than 1,000 jobs during the pandemic and expects to build on this number during 2021 and 2022.

This is part of a £7.5bn investment plan up to 2025, including building the world’s biggest offshore wind farm at Dogger Bank.

It also plans to invest a further £2.8bn by 2026, connecting up renewable power and transporting it via the electricity transmission system.

The group repeated its ambition to ramp up renewable energy development to reach a run rate of at least one gigawatt of new assets a year, during the second half of the decade.

It will be seeking further opportunities overseas to export its renewables and engineering knowledge.

SSE did not draw on government support during the pandemic in the form of furlough or rates relief. Instead, it was able to boost employment both direct and through its supply chain, as it led more construction of offshore wind than any other company in the world currently.

SSE chair John Manzoni said: “Thanks to the commitment of employees right across the business in 2020/21 we made an important contribution to the national pandemic response, delivering strong operational performance, and making significant strategic progress.

“We have also made significant progress on our non-core disposals programme, creating value for shareholders while continuing to sharpen the group’s strategic focus on its low-carbon electricity core in networks and renewables, where our capital investment programme is progressing well.

“Looking ahead, a strong balance sheet, underpinned by world-class assets, gives us a firm footing from which to capitalise on the considerable future growth opportunities we are creating in the transition to net zero.”

SSE chief executive Alistair Phillips-Davies said: “The UK is leading the world in the decarbonisation agenda and SSE is powering that change – we want to keep the momentum up and ensure the economic recovery helps tackle the climate emergency too.

“At the same time we are focused on ensuring equitable social outcomes from the net zero transition; and through our investment programme we are building projects that will not only help tackle climate change, but will create green jobs and revitalise communities along the way.”

Commenting on the results, Brewin Dolphin senior investment manager John Moore noted that the company is the largest issuer of green bonds in the FTSE and has a range of sustainability-based investment opportunities.

“The key debate, however, is the level of dividend payment – while investors may be pleased to see the RPI-linked increase and have the certainty of a dividend path until 2023, there is an argument that SSE should be paying a lower dividend after this date and investing more to benefit from the changing energy environment.”

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