UK power group SSE announced plans to increase its multibillion-pound investment drive in clean energy projects and networks as it unveiled a near-90 per cent rise in full-year profits.
SSE, one of Britain’s largest renewable energy operators, now plans to invest £18bn by 2027 and potentially as much as £40bn over the decade as profits climbed to £2.2bn, helped by higher electricity and gas prices.
The FTSE 100 energy company’s investment injection is about 40-50 per cent higher than under previous plans outlined last year.
The vast majority of that is expected to go to the UK and Ireland, where SSE owns its core portfolio of gas-fired power plants, electricity networks and wind turbines.
About half of its planned £18bn investment by 2027 will go into electricity networks, with renewable electricity generation, mainly offshore wind turbines, expected to get 40 per cent.
Alistair Phillips-Davies, chief executive, said the upgrade followed “strong financial performance” over the year as well as the “resilience” of its business and balance sheet.
However, he said it would require “the right policies and commitments from government”, adding: “We have lots of shovel-ready projects, what we’re encouraging government and policymakers to do now is get into delivery mode.”
SSE also said it had abandoned moves to sell a minority stake in its UK electricity distribution network, having concluded the sale was not needed “at this point in time”.
In November it sold a 25 per cent stake in its UK electricity transmission network to the Ontario Teachers’ Pension Plan for £1.5bn to help raise funds for investment.
SSE’s adjusted pre-tax profits for the full year ending March 2023 climbed 89 per cent from £1.6bn to £2.2bn. The biggest increase came from its gas assets. Adjusted operating profits from its gas-fired power plants soared 244 per cent to just over £1bn.
The plants have benefited from extreme surges in British wholesale power prices last year amid tight electricity markets because of factors including outages on France’s nuclear fleet, which affects power supplies in Britain. Ageing nuclear plants in Britain have also closed.
The gas-fired power plants can quickly ramp up or down to respond to shortages, when prices are high. SSE also bought a new gas power station, Triton Power, during the year, and opened another, Keadby 2, in Lincolnshire.
In a blow to the government as it tries to bring down energy bills, SSE said it was expecting a “sustained higher price environment in the medium term”.
The UK government last year introduced a windfall tax on low carbon electricity generators as concerns rose they were making excess profits from high electricity prices.
It came into force in January 2023 and has cost SSE £43mn. The tax does not apply to gas-fired power stations.
Under the plans, SSE will pay a 96.7p per share dividend this year before rebasing to 60p for 2023/24 to help fund its investments. It is then targeting annual increases of 5-10 per cent to 2026/27.
The upgraded investment proposals are a boost for the UK government, with the country facing growing competition for investment from the US and Europe, where large subsidies are on offer.
UK chancellor Jeremy Hunt said the plans were a “further vote of confidence in the British economy” and would help ensure “energy security, lower bills and thousands of jobs”.
SSE’s shares were steady at £18.60 in London by early afternoon.