SSE Reaffirms Strategy After Elliott Renews Calls for Change -- 2nd Update
By Jaime Llinares Taboada
SSE PLC said Tuesday that its current strategy represents the
optimal pathway, after shareholder Elliott Advisors (UK) Ltd.
called for the board to restore investor confidence and continued
its push for the energy company to spin off its renewables
The Elliott Management Corp. subsidiary, which has been pushing
for the separation of SSE's renewables business from the rest of
the company, said in a letter to Chairman John Manzoni that it was
challenging the energy company to provide a plan to address
investor concerns around its corporate governance, its ability to
fund growth in the long term, and its "persistent
SSE is one of the U.K.'s largest energy transmission and
distribution companies. However, the group is now focused on
growing its portfolio of wind farms.
Elliott said the letter "was sent in the wake of the company's
disappointing announcement on Nov. 17 and the resulting decline in
SSE's stock price". That day, shares in SSE closed 4.3% lower after
the group said it would cut its dividend and sell stakes in its
network business to fund investment in renewables.
Elliott said the announcement failed to provide any explanation
for why SSE wasn't pursuing a listing of the renewables assets,
which the investor estimates could have unlocked 5 billion pounds
($6.63 billion) of value. Elliott also said the plan to sell a
minority interest in the networks division lacked ambition, and
that cutting the dividend disappointed many income-oriented
In the letter, the shareholder called on SSE to explore
additional strategic initiatives, including a more ambitious
disposal of the networks business and a partial listing or partial
disposal of the renewables division. It also proposed the
appointment of two new independent directors with renewables
experience, and to create a strategic review committee composed of
independent board members.
Later Tuesday, SSE replied to Elliott saying that the current
strategy "represents the optimal pathway", and said that breaking
up the group would have several downsides. Chief Executive Alistair
Phillips-Davies said the separation would risk valuable growth
options, jeopardize the company's ability to finance and deliver
major infrastructure, and lose shared skills.
"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," Mr. Phillips-Davies said.
Shares in SSE at 1032 GMT were up 0.4% at 1,637 pence.
Some analysts have been critical of SSE's strategy in recent
months. RBC Capital Markets said the company is in danger of
disappointing both income investors looking for cash-flow
generation from networks, and growth investors attracted to the
renewables portfolio. Similarly, as quoted by Elliott in its
letter, Barclays analysts have said they view SSE trying to please
everyone at a risk of pleasing no one.
RBC said in a note Tuesday that any change of direction from SSE
management could be some distance away.
Write to Jaime Llinares Taboada at firstname.lastname@example.org;
(END) Dow Jones Newswires
December 07, 2021 05:53 ET (10:53 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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