SSE, a prominent UK power group, has unveiled its ambitious plans to significantly increase investments in clean energy projects and networks. The company reported a remarkable surge of nearly 90 percent in full-year profits, reaching £2.2 billion, largely attributed to higher electricity and gas prices. SSE now intends to invest £18 billion by 2027, with the potential for a staggering £40 billion over the next decade. This investment drive represents a 40-50 percent increase compared to its previous plans announced last year.
The majority of these funds are expected to be directed towards the UK and Ireland, where SSE owns a core portfolio of gas-fired power plants, electricity networks, and wind turbines. Within the planned £18 billion investment by 2027, approximately 50 percent will be allocated to electricity networks, while renewable electricity generation, primarily offshore wind turbines, is set to receive 40 percent.
Alistair Phillips-Davies, the CEO of SSE, attributed the decision to upgrade the investment plans to the company's strong financial performance and the resilience demonstrated by its business and balance sheet. However, Phillips-Davies emphasized that the realization of these plans is contingent upon the appropriate policies and commitments from the government. He urged government officials and policymakers to transition from planning to implementation, highlighting SSE's readiness to initiate various projects.
SSE also announced the abandonment of its efforts to sell a minority stake in its UK electricity distribution network, deeming it unnecessary at this juncture. In November of the previous year, the company had sold a 25 percent stake in its UK electricity transmission network for £1.5 billion to the Ontario Teachers' Pension Plan, a move aimed at raising funds for investment.
SSE's adjusted pre-tax profits for the fiscal year ending in March 2023 experienced a remarkable 89 percent increase, rising from £1.6 billion to £2.2 billion. The largest surge in profits was observed in its gas assets, with adjusted operating profits from gas-fired power plants soaring by an impressive 244 percent to slightly exceed £1 billion. These power plants benefited from substantial spikes in British wholesale power prices in the previous year, a consequence of factors such as outages in France's nuclear fleet, which impacted power supplies in the UK. Additionally, aging nuclear plants in the UK have ceased operations. The flexibility of gas-fired power plants to swiftly adjust their output in response to shortages and high prices contributed to their success. SSE also acquired Triton Power, a new gas power station, and inaugurated Keadby 2, another gas power station, in Lincolnshire during the year.
SSE's forecast of a sustained higher price environment in the medium term dealt a blow to the UK government's efforts to lower energy bills. Last year, the government implemented a windfall tax on low carbon electricity generators amid concerns of excessive profits resulting from high electricity prices. This tax, which came into effect in January 2023, has cost SSE £43 million. Notably, gas-fired power stations are exempt from this tax.
To finance its investments, SSE plans to pay a dividend of 96.7p per share this year, followed by a rebasing to 60p for the fiscal year 2023/24. The company aims for annual dividend increases of 5-10 percent until 2026/27.
These enhanced investment proposals from SSE serve as a boost for the UK government, particularly in the face of mounting competition for investment from the United States and Europe, where substantial subsidies are available. UK Chancellor Jeremy Hunt hailed the plans as a further vote of confidence in the British economy, expressing confidence that they would contribute to energy security, lower bills, and the creation of thousands of jobs.
