Activist investor Elliott eyes break-up of energy giant SSE
SSE's renewables and electricity businesses may be split.
Billionaire Paul Singer’s Elliott Investment Management is pushing for a break-up of SSE after building up a stake in the British power company, sources have said.
The activist hedge fund sees value in separating SSE’s renewable portfolio from its regulated electricity businesses, the sources said.
Elliott has been meeting privately with representatives from SSE, which is based in Perth in Scotland, as well as some of its major shareholders, according to the people.
SSE – which owns SSE Airtricity in Ireland - has developed clean energy projects across the UK and Ireland, with about 4 gigawatts of wind and hydroelectric power assets. It aims to triple its renewable power output from 2019 levels by 2030.
The company also runs a regulated power grid business in the UK and owns a number of gas-fired power plants and energy storage operations. Its network supplies electricity to 3.8 million customers in northern Scotland and central southern England.
Elliott has pursued a similar playbook before with EDP-Energias de Portugal, pushing the company to sell a stake in its Iberian electricity distribution business and offload a Brazilian unit to reinvest the proceeds in renewable energy. Shares of EDP’s listed renewables arm have more than tripled over the past four years, and it’s now worth more than its parent company.
The SSE investment comes at a time when deal activity is picking up in the utilities sector, aided by investor interest in assets offering steady long-term returns.
In the UK, National Grid Plc is working on the sale of a majority stake in its gas grid business, after agreeing to buy PPL’s UK electricity distribution business for £7.8bn (€9.1bn) as part of efforts to prepare for a low-carbon future.
SSE is “undervalued at current levels” according to John Musk, an analyst at RBC Europe. But “it may be some time before anything potentially materialises from the situation.”
Shares of SSE gained as much as 2.4%, giving it a market value of £17.2bn.
In SSE’s last financial year, its Irish operations – SSE Airtricity – generated £44m in adjusted operating profit, nearly 10% down on the previous year.
As of the end of that financial year – the end of March – its customer numbers in Ireland amounted to 680,000 households, down from 720,000 12 months earlier.
Elliott also recently disclosed a 5% interest in UK specialty pharmaceutical firm Clinigen Group. Elliott is in conversations with the company and is seeking ways for Clinigen to unlock value.
Clinigen has long been seen as a takeover target for buyout firms, but no concrete offers emerged even in the depths of the pandemic-fuelled market rout. The company’s stock plunged in June when it gave lower-than-expected earnings guidance.
Clinigen acquires the rights to niche commercial drugs and expands their distribution. It also helps patients get access to treatments that aren’t licensed in their countries.
