This blog is designed to record the investment journey of a UK based small investor. I hope to make a modest contribution to the collective wealth of investing knowledge made freely available to ordinary people. I am the author of five books [see sidebar and books tab]
SSE (formerly Scottish & Southern Energy) is a
FTSE 100 company operating in the energy business across the UK and Ireland.
Tackling climate change is at the center of their operations and their aim is
to be a leader in a low carbon world through significant future investment in
renewable energy and storage solutions.
Last month they disposed of their retail Energy Services
arm to Ovo and going forward the bulk of operating profits will be generated
from regulated electricity networks and renewables which are core elements of
their low carbon strategy and the reason I have taken another look at this company.
In late 2018, the company announced it would
consolidate its renewable energy assets under the single entity of SSE
Renewables. The current portfolio has around 4GW of both offshore and onshore
wind as well as hydro which includes 300MW of pumped storage and 750MW of
flexible hydro. It has the largest offshore wind pipeline of future projects in
the UK and Ireland of over 7GW.
SSE in partnership with Equinor are engaged in the
construction of the world's largest offshore windfarm in the North Sea which
will generate 3.6GW of clean electricity, sufficient to power 4.5m homes and
using the world's most powerful turbines, the GE Halidade-X. The windfarms are
due to start operations in 2022.
Dogger Bank Wind Farm
Last year, renewable accounted for around one
third of profits however over the coming decade they plan to treble renewable
output to 30TWh per year which would be enough to power the whole of Scotland.
According to the latest Q3 trading update SSE
Renewables output increased by 6.3% in the first 9 months which was 5% lower
than expected. The company confirmed that operations at its last coal power
station will cease in March and they are working on plans to dispose of gas
production assets over the coming year.
Adjusted earnings are on track for around 85p per
share and the expected full year dividend is 80p (interim 24p to be paid in
March and final in Sept). At the current share price of 1602p, this gives a
yield for shareholders of 5.0%. Full year results are due 22nd May.
SSE will be pleased to have disposed of its retail
energy service arm to Ovo following the failed attempt to offload to nPower
last year. The plans to wind down coal and gas, decarbonise the business model
and focus on renewables is clearly the way to go in my book - I would not have
added to my portfolio otherwise!
The new Government have pledged to increase the
UK's offshore wind capacity from 8.5GW to 40GW over the coming decade. This is
a very significant shift in our approach to energy as we move away from fossil
fuels and should give confidence to the renewables industry and provide
profitable opportunities for the established operators such as SSE and Orsted.
3 Yr Share Price (click to enlarge)
The share price has been under pressure in recent
years but seems to be back on an upward trend these past few months and a rise
of 60% since last May. Obviously with the wider market sell-off, there has been
some pull back over the past week or so but much less than the FTSE 100 index. The
shares were added to my ISA at the price of £16.00.
As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!