British energy group SSE has announced plans to increase its multi-billion pound investment in clean energy projects and networks as it revealed a nearly 90 per cent increase in full-year profit.
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 with profits rising to £2.2bn, boosted by higher electricity and gas prices.
The injection of investments into the FTSE 100 energy company is about 40-50 percent higher than the previous plans outlined last year.
The vast majority of that is expected to go to the UK and Ireland, where SSE has its core portfolio of gas-fired power plants, power grids and wind turbines.
About half of its planned £18bn investment by 2027 will go into electricity grids, with renewable electricity generation, particularly offshore wind turbines, expected to account for 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 that would require “the right policies and commitments from government,” adding: “We have a lot of projects ready to be scooped up, and what we encourage government and policymakers to do now is get into delivery mode.”
SSE also said it had abandoned steps to sell a minority stake in the UK electricity distribution network, after concluding that a sale was not necessary “at this point in time”.
In November it sold a 25 per cent stake in the UK transmission network to an Ontario Teachers Pension Scheme for £1.5bn to help raise funds for the investment.
SSE’s adjusted profit before tax for the full year ending March 2023 rose 89 per cent from £1.6 billion to £2.2 billion. The largest increase came from gas assets. Adjusted operating profit from gas-fired power plants rose 244 per cent to just over £1 billion.
The plants benefited from sharp increases in wholesale electricity prices in Britain last year amid the scarcity of electricity markets due to factors including the outage of the French nuclear fleet, which is affecting energy supplies in Britain. Old nuclear plants in Britain have also been closed.
Gas-fired power plants can quickly scale 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.
And in a blow to the government as it tries to lower energy bills, the SSE said it expects a “sustainable higher price environment in the medium term”.
Last year the UK government imposed an unexpected tax on low-carbon electricity generators as concerns grew that they were making excessive profits from rising electricity prices.
It came into effect in January 2023 and cost SSE £43m. The tax does not apply to gas-fired power plants.
Under the plans, SSE will pay a 96.7p per share dividend this year before re-incorporating to 60p for 2023/24 to help fund its investment. It is therefore targeting annual increases of 5-10 per cent until 2026/27.
The upgraded investment proposals are a boost for the UK government, as the country faces increased competition for investment from the US and Europe, where hefty subsidies are being offered.
Britain’s finance minister, Jeremy Hunt, said the plans represented “an additional vote of confidence in the UK economy” and would help ensure “energy security, lower bills and thousands of jobs”.
SSE shares settled at £18.60 in London in the early afternoon.