Activist investor Elliott Advisors has written a letter to SSE chairman John Manzoni calling for a partial listing or disposal of the utility’s renewables business.
The US hedge fund manager, one of the top five investors in SSE, said that utility needed to act “expeditiously” to restore investor confidence.
According to the letter, an announcement by SSE last month failed to explain why the utility was not pursuing a listing of its renewables business, which Elliott believes could have unlocked £5bn of value.
The letter goes on to contest a claim by SSE management that a standalone renewables business would not be able to pursue offshore wind projects like Dogger Bank, arguing that RWE is similarly developing 1.4GW of capacity at sister project Sofia despite being a “non-integrated player”.
Elliott added that a decision by SSE to cut dividends had also disappointed many of its investors.
Elliott is now calling on Manzoni to explore “additional strategic initiatives”, which could include a partial listing or minority stake disposal of its renewables business, as well as a larger disposal of its Networks business than the 25% that has been earmarked by the utility.
The letter stated: “Contrary to management’s assertions, listing SSE’s Renewables business would enhance its ability to finance big projects by unlocking access to significantly lower-cost equity financing from the flood of ESG-focused investors who would be attracted to a pure-play green-energy champion.”
In a statement in response to Elliot’s letter issued to the SSE chairman, SSE chief executive Alistair Phillips-Davies (pictured) said: “Separation risks valuable growth options across the clean energy value chain, would jeopardise our ability to finance and deliver the major infrastructure the UK needs to create jobs and achieve net zero, and would lose shared skills that benefit the group.
“Separation does not support the financing of our core growth businesses and would rule out adjacent growth options, as well as reducing the resilience of the business model – it is not the right outcome to maximise value for shareholders or our other stakeholders.”
He added that the utility has recently launched its Net Zero Acceleration Programme, after conducting a “rigorous process” involving constructive engagement with shareholders, and consideration of independent advice.
“Since then, we’ve continued to have constructive and supportive discussions with our major shareholders and stakeholders about the plan, which was also backed by Moody’s who reaffirmed SSE’s Baa1 rating and upgraded their outlook to stable on the strength of the plan,” Phillips-Davies added.