SSE announces £2bn share issue as part of massive upgrade plans 

In Ireland, SSE Airtricity supplies over 460,000 electricity customers and almost 310,000 gas customers

SSE chief financial officer Barry O'Regan said the company's decision to issue equity was not taken lightly but is 'absolutely the right thing to do'.

Energy and utility giant SSE jumped to a record after the utility outlined a £33 billion (€37bn) plan to upgrade grids and boost renewable energy that will be partly funded by issuing new shares.

The spending update brings clarity to investors and analysts who have sought more details on how the UK-headquartered utility plans to fund its ambitious goals in the years ahead. Shares soared as much as 13% in London, the most in five years.

The Irish arm of the company, SSE Airtricity, supplies over 460,000 electricity customers and almost 310,000 gas customers across the 32 counties. SSE is investing €300m in projects in Ireland. The company has recently grown its onshore wind portfolio with the completion of Yellow River Wind Farm, a 101MW, 29-turbine wind farm in Offaly. Back in July, SSE gave the green light to plans for a €300m power station at Platin in Co Meath, following on from plans to invest in a power station in Tarbert, Co Kerry. 

The company also plans an offshore wind park at Arklow Bank, off the south-east coast, delivering 800MW of energy.

The equity raise announced on Wednesday is another sign that Europe’s big utilities are turning to investors to fund large-scale grid and renewables projects. Last month, Denmark’s Orsted raised 60 billion Danish kroner (€8bn) through a rights offering — the largest by a European energy firm in over a decade.

“We don’t take issuing equity lightly," SSE chief financial officer Barry O’Regan said on a call with analysts. “But it’s absolutely the right thing to do to unlock this exciting plan,” the Dubliner added.

With share-sale proceeds of £2bn accounting for only a small portion of SSE’s planned grid investments, most of the cost for its planned upgrades will still be added to consumer bills. Like other European networks, SSE’s regulated units recover spending through energy companies that pay to use the grid and then pass it on to households. Energy bills are in focus ahead of this month’s UK budget, as the British government seeks to fund the energy transition without making it unaffordable.

Bloomberg reported last week that SSE was exploring funding options. The new investment plan “brings clarity to the balance sheet and the company’s growth outlook,” said Ahmed Farman, a European equities analyst at Jefferies. The £2bn is, however, at the lower end of what was expected, he added.

In SSE’s five-year strategy, about £27bn of the total will go toward expanding electricity networks needed to keep up with the rapid expansion of renewables, as well as efforts to electrify industries and support the expansion of artificial intelligence. The remaining £6bn will be spent on building out renewables assets, including wind farms and flexibility assets such as batteries and gas plants.

The strategy triples the firm’s investment compared with the previous five-year period. As much as 80% will go toward grids, up from about half in the previous program. SSE expects about 80% of its earnings by 2030 to be linked to its regulated grid business, up from 60% this year.

The company reaffirmed its financial guidance, saying it remains on track to deliver adjusted earnings per share of 175 to 200p in 2026/27 based on calculations using the current share count. When new shares are issued due to the capital raise, earnings per share may be lower as the number of shares increases and dilutes earnings.

By 2029, SSE expects earnings per share to rise to between 225 and 250p after accounting for the new shares. The company’s capital investment in the six months through September 30 rose 22% to £1.6bn, covering spending on its grid.

SSE is building the world’s biggest offshore wind farm which is central to Britain achieving its clean energy targets. Construction work at its sites is progressing well, with turbine installation at the UK’s Dogger Bank A on track for completion by the end of the year. The company also secured consent for its 4.1-gigawatt Berwick Bank project, paving the way for participation in upcoming UK auctions.

The capital raise will fund about 5% of the total investment with 35%, or about £14bn, coming from net debt and hybrid capital. The company said that a further £2bn would come from asset rotations.

Morgan Stanley, UBS Group, and Barclays are leading the offering, according to the statement. The placing represents about 10% of SSE’s current issued share capital.

Bloomberg