By: Margaret Diedrich, AIM Student at Marquette University
Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.
- SSE Plc (NYSE: SSEZY) operates in three segments: Networks, Retail, and Wholesale. Through these operations they supply, distribute, and transmit electricity to customers in the United Kingdom and Ireland.
- Following the UN Climate Change Conference (COP26), SSE announced an increase in of £1 billion in technology and infrastructure. This increases their investment in green technology to £12.5 billion for the next five years.
- The company will fund this investment by selling 25% of their transmission and distribution grid assets as well as amending their dividend policy.
- The company received pressure from activist investors to separate out a portion of their renewable business. However, management remains keen on keeping the business together.
Key points: Right on the heels to the UN Climate Change conference, SSE plc made major commitments to increase their spending on renewable investments. The company announced their Zero Net Acceleration Program with the goal of leading the transition to renewable energy. The company plans to increase their spending by £1 billion a year, making their total capital expenditure investment amount to 12.5 billion. This new investment coincides with COP26’s target of 1.5° Celsius for the energy sector. This goal would have global emissions stop at a 1.5° Celsius limit. The conference called for countries to strengthen their commitments to renewable energy, and SSE plc is helping do just that for Britain.
The company has also announced a plan to optimize the allocation of capital between regulated and unregulated business. Through selling a minority interest in their transmission and distribution business and a new dividend plan, they will be able to expand and meet their energy goals proposed in the Zero Net Acceleration Program. The investment and sale are also in part a response to activist investment firm Elliot Management. The firm was pushing for the company to fully spin off their renewable segment of business. However, SSE plc is a key part in the United Kingdom’s targets made at the conference and they are well positioned to help achieve these goals. On top of the commitments made at COP26, the scarcity of gas in the UK has electricity prices soaring, increasing the demand for a green alternative.
What has the stock done lately?
The stock has remained relatively steady. Since the stock was bought in early October, it has increased from $21.41 to $21.76. In the past month the stock price has decreased from $23.33 to 21.76. In the past sixth months, adjusted EPS increased by 44% and the company reported the profit from the past six months as £161.51 million, up from £122.3 million one year ago.
Past Year Performance: SSE plc has seen considerable growth in the past year. The stock has increased 17.34% in value over the past year. SSEZY has outperformed the bench mark and is well positioned to continue to growth in the future.
SSE plc is well positioned for the future. Their recent announcement of their investments in renewable technology is exciting for the UK and shareholders alike. Their announced Net Zero Acceleration Program promises enhanced growth through 2026. These programs and investments combat many of the risks associated with the business that were in play when the stock was added to the portfolio. The company’s capital commitment to growing their renewable business segments combat the possibility of energy infrastructure failure as well as solidify their political and societal standing as a green energy player. Aside from the placation of risks, the drivers for the company are intact and beginning to yield results. I am excited to see how the company innovates and growths in the next five years and beyond.