SSE'S NET ZERO ACCELERATION PROGRAMME
STRATEGIC UPDATE
17 NOVEMBER 2021
- SSE announces 'Net Zero Acceleration Programme' to accelerate clean growth, lead the energy transition and maximise value for all stakeholders
- Plans include enhanced, fully funded £12.5bn strategic capital investment plan to 2026 alongside ambitious 2031 targets, aligned with net zero and 1.5 degrees
- Net Zero Acceleration Programme represents optimal pathway to consolidate SSE's position as UK's clean energy champion, enabling delivery of over 25% of UK's 2030 40GW offshore wind target and over 20% of UK electricity networks investment, whilst deploying flexibility solutions and exporting renewables capabilities overseas
KEY ELEMENTS OF NET ZERO ACCELERATION PROGRAMME
Fully-funded £12.5bn five-year strategic capital investment plan to 2026 focused on net zero infrastructure:
£12.5bn net capex investment to 2026 represents +65% step-up in annual investment (£1bn additional capital investment per year) on previous plan with over 2.5 times more capital now allocated to renewables growth.
Investment will deliver ~4GW net renewables capacity additions (doubling renewables capacity) and grow electricity networks underlying RAV to ~£9bn net of assumed 25% minority stake sales.
The plan is supported by further renewables partnering; and minority stake sales in both SSEN Transmission and SSEN Distribution (modelling assumption of early FY24) to unlock value and optimise investment.
Reshaped capital allocation to c40% Networks, c40% Renewables, c20% other flexible generation, distributed energy and customer businesses.
Adjusted EPS CAGR of 5-7% forecast to March 20261, after assumed minority interest.
Growth-enabling dividend, paying at least £3.50 per share across the five years, comprising:
- completion of current RPI linked dividend plan to March 2023
- followed by a rebased dividend to 60p in 23/24 with attractive annual growth of at least 5% to March 2026
- scrip dividend option capped at 25%
Net debt to EBITDA target of 4.5x, aligned with a strong investment grade credit rating.
1 Relative to FY21 87.5p
Plan delivers accelerated growth at attractive returns into 2026:
Renewables net installed capacity increasing by 4GW, doubling existing capacity.
Increases and maintains a sustainable development pipeline in excess of 15GW.
Networks businesses' RAV forecast to grow at c. 10% gross CAGR.
Compelling returns targeted, focusing on high quality assets with common Group capabilities:
- Renewables offshore: at least 10% equity returns (excluding developer profits) with onshore: WACC plus 100-400 bps project returns.
- New technologies WACC plus 300-500 bps given expected technology risk and construction risk specific to each project.
- Networks 7-9% return on equity, assuming a level of outperformance and CPI inflation of 2% p.a.
Programme provides the platform for ambitiousnew 2031 targets including:
Fivefold increase in renewables output to 50TWh p.a.
Maintaining a sustained >15GW renewables pipeline, delivering >1GW net additions p.a. and increasing renewable and other low-carbon generation capacity to >16GW.
8-9% gross networks RAV CAGR for electricity networks, to reach £11-13bn net.
Meeting revised 1.5 degree celsius science-based carbon targets by 2030.
Sir John Manzoni, SSE plc Chair, said:
“Over the past months the Board of Directors has carefully considered a range of strategic alternatives for the next phase of SSE's growth and development. Having reviewed all options and taken independent advice, this resulting strategic update significantly accelerates growth in our core businesses, whilst providing efficient and competitive sources of financing and ensuring SSE continues as a reliable and resilient operator of critical infrastructure.
“The Board believes these plans represent the optimal pathway for SSE, positioning it as the UK's clean energy champion with the scale to enable the delivery of over 25% of the UK's 40GW offshore wind target and over 20% of upcoming UK electricity networks investment, deploy flexibility solutions to keep the lights on, whilst exporting its renewables capabilities overseas. SSE is creating long-term value for all of our stakeholders.”
Alistair Phillips-Davies, Chief Executive, said:
“In recent years we have made great progress in focusing the SSE Group on the delivery of the electricity infrastructure needed in the transition to net zero. We are constructing more offshore wind than anyone else in the world right now and expanding overseas, delivering the electricity networks needed for net zero and pioneering carbon capture, hydrogen and battery technologies to deliver system flexibility.
“Our Net Zero Acceleration Programme represents the next phase of SSE's growth and involves a substantial ramping up of investment – equivalent to nearly £7m each day in net zero infrastructure – backed up by clear delivery and funding plans. It builds on our existing strong platform for growth and highly desirable pipeline to create significant value for shareholders and wider society while further enhancing the long-term potential of the business.
“Today's announcement means SSE will maximise its long-term potential and capture growth opportunities during a critical time for the energy sector, strengthening and growing its core businesses, creating jobs, delivering for wider society and offering attractive shareholder returns.”