SSE to bolster electricity networks in £33bn investment plan

(Sharecast News) - SSE is to spend billions on the UK's electricity network, the FTSE 100 firm announced on Wednesday, as it unveiled a "transformational" five-year investment plan alongside interim results. The power generator said the £33bn investment would increase its exposure to UK electricity networks and drive earnings growth.

Around £27bn will be invested in regulated UK electricity networks, with the rest in renewables and system flexibility.

The bulk of the funds - £21bn - will come from operational cashflow generation, while £14bn will be raised through an increase in adjusted net debt and hybrid capital. Another £2bn will be funded by an equity placing.

Martin Pibworth, chief executive, said: "[This] transformational investment plan will help build a clear, more secure and more affordable energy system.

"Upgrading the UK electricity network offers a once in a generation opportunity for accelerated investment that is underpinned by secure UK government regulatory frameworks.

"It will unlock much-needed growth across the wider economy, and support thousands of jobs."

By noon GMT the stock had surged 12% at 2,216p, despite the likely dilution associated with the equity raise.

The update came as SSE - which has been expanding rapidly into renewable energy generation - posted a 29% fall in interim adjusted earnings per share, to 36.1p. Reported pre-tax profits slid 30% to £634.2m.

SSE said the decline was in line with expectations and consistent with typical seasonality.

Looking to the full-year, the Perth-based group said it expected profits in both transmission and renewables to be higher year-on-year.

But adjusted operating profits were forecast to fall sharply in distribution, "as allowed revenue is expected to decrease by around £400m following a one-off inflation cost recovery in 2024/25".

Russ Mould, investment director at AJ Bell, said of the investment plan: "The promised growth alongside this spending is clearly helping the market warm to the deal, with the intention being to continue growing dividends too.

"The fact that a good portion of the £33bn is being funding by cash from SSE's existing assets lends credibility to the plan and its pledge to keep increasing the payout."

Neil Wilson, UK investor strategist at Saxo Markets, said: "It's a serious boost to capital allocation into UK electricity infrastructure. The investment could be a useful boost to the Chancellor."