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1. Company Snapshot

1.a. Company Description

SSE plc engages in the generation, transmission, distribution, and supply of electricity.It generates electricity from water, gas, coal, oil, and multi fuel.The company distributes electricity to approximately 3.8 million homes and businesses across the north of the central belt of Scotland and central southern England; and owns, operates, and develops high voltage electricity transmission system in the north of Scotland and remote islands.


It also produces, stores, distributes, and supplies gas.In addition, it engages in the electricity and utility contracting, telecommunications, energy trading, insurance, and property holding businesses, as well as provides maintenance services.The company was formerly known as Scottish and Southern Energy plc and changed its name to SSE plc in September 2011.


SSE plc was incorporated in 1989 and is based in Perth, the United Kingdom.

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1.b. Last Insights on SSE

SSE plc's recent performance has been positively influenced by a £3 billion investment pivot to electricity transmission, bolstering its growth initiatives. Analysts have modestly upgraded their price targets, citing a steady financial outlook and confidence in the company's core business. The company's strategic direction has garnered growing optimism, with a focus on operational stability and progress on growth initiatives, as noted by industry analysts. This upward momentum is driven by SSE's evolving narrative, marked by updated assessments and a positive outlook.

1.c. Company Highlights

2. SSE's Transformative Investment Plan Unveiled with Strong H1 Results

In the first half, SSE delivered adjusted operating profit of GBP 655 million, with adjusted EPS of 36.1p, in line with expectations and slightly above analyst estimates of 0.354. The actual EPS came out at 0.361. Revenue growth is expected to be around 5.8% next year, indicating a positive trajectory. The company's financial performance has been stable, with a net debt to EBITDA ratio of 2.9, below the target of 4.5x.

Publication Date: Nov -13

📋 Highlights
  • Total Investment Plan:: GBP 33 billion, with 80% allocated to networks, targeting a 25% CAGR in regulatory asset base to 2030.
  • Earnings Growth Target:: Adjusted EPS of 225-250p by 2030, representing 7-9% CAGR from 160.9p in FY 2025.
  • Funding Structure:: 90% self-funded via operational cash flows (£21 billion) and net debt/hybrids (£14 billion), 10% from equity (£2 billion) and asset rotations (£2 billion).
  • Capital Allocation Shift:: 80-20 split favoring networks (vs. historical 50-50), with £22 billion CapEx (GBP 20 billion for transmission, GBP 2 billion for renewables).
  • Efficiency and Returns:: GBP 200 million annual efficiency target by 2028 (up from GBP 100 million), and offshore wind equity returns >12%.

Investment Plan and Funding

The GBP 33 billion investment plan is fully funded, with 80% focused on networks, aiming to grow the regulatory asset base by a 25% compound annual growth rate to 2030. The plan is underpinned by SSE's track record of delivery, including recent projects such as the Shetland HVDC connection and Dogger Bank. The funding sources include GBP 21 billion from operational cash flows, GBP 14 billion from increasing net debt and hybrid capital, GBP 2 billion from targeted asset rotations, and GBP 2 billion from an equity placing.

Strategic Focus and Growth Areas

The investment plan focuses on four key areas: rapid expansion of the transmission network, strategic local distribution upgrades, a doubling or tripling of homegrown energy generation supply, and a greater focus on storage and flexibility. The company is confident in delivering against its FY '27 earnings projection, with a target of adjusted EPS of 225-250p by 2030, representing a 7-9% compound annual growth rate from the 2025 baseline.

Valuation and Dividend Policy

With a current P/E Ratio of 21.08 and an EV/EBITDA of 10.49, the market seems to have priced in SSE's growth prospects to some extent. The dividend policy will continue, with a 5-10% per year increase in dividend per share to 2030, providing a Dividend Yield of 2.83%. The company's ROE is 10.19%, indicating a decent return on equity.

Future Prospects and Risks

The company's plans are based on assumptions such as inflation decreasing to around 2%, baseload power prices averaging around GBP 60, and the cost of new debt being between 5% to 5%. The company is confident in its ability to deliver the investment plan without any significant surprises, having conducted thorough scenario analysis and stress testing. Berwick Bank, a potential future project, is not included in the current plan but has been considered in scenario analysis.

3. NewsRoom

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FTSE 100 Live: Blue-chips slam brakes, SSE leads charge after investment pivot

Nov -12

Source: proactiveinvestors.com

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FTSE 100 Live: Blue-chips open at new record high, SSE leads charge after investment pivot

Nov -12

Source: proactiveinvestors.com

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Looking at the Narrative for SSE After Price Target Upgrade and Strategic Updates

Nov -07

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Looking at the Narrative for SSE After Analysts Adjust Price Target and Growth Outlook

Oct -23

Source:

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How Recent Developments Are Shaping the SSE Investment Narrative

Oct -09

Source:

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SSE plc's (LON:SSE) Dismal Stock Performance Reflects Weak Fundamentals

Sep -11

Source:

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Form 8.3 - IQE Plc

Sep -09

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Taylor Wimpey (LSE:TW.): A Fresh Look at Valuation After a Year of Share Price Pressure

Sep -09

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.65%)

6. Segments

SSE Energy Markets

Expected Growth: 6.5%

Industrial electrification, decarbonization of transportation, and growth in non-domestic demand drive energy demand, while SSE plc's scale, operational efficiency, and customer base underpin segment growth

SSE Thermal

Expected Growth: 5.2%

SSE Thermal’s growth is driven by government support for low-carbon energy transition, increasing electricity demand, and its strategic positioning as a major thermal energy business.

SSE Business Energy

Expected Growth: 4.5%

Growing demand for energy, increasing competition, and government initiatives drive growth in the UK and Ireland, with SSE Business Energy well-positioned to capitalize on these trends

SSE Airtricity

Expected Growth: 6.3%

Growing demand for renewable energy sources, increasing investment in grid infrastructure, and government initiatives to reduce carbon emissions drive growth in the Irish and Northern Irish energy supply markets.

SSEN Distribution

Expected Growth: 4.5%

Strong demand for electricity distribution in the north of the UK, driven by population growth and urbanization, will propel SSE Distribution’s growth, bolstered by the company’s focus on infrastructure investments and commitment to reducing carbon emissions.

Gas Storage

Expected Growth: 5.2%

SSE's growth is driven by increasing demand for renewable energy, strategic investments in grid infrastructure, and a strong track record of operational efficiency, positioning the company for long-term growth.

SSE Renewables

Expected Growth: 5.5%

SSE Renewables’ growth is driven by increasing demand for clean energy, and government incentives for renewable energy projects, supporting the UK and Ireland’s transition to a low-carbon economy.

SSEN Transmission

Expected Growth: 5.5%

SSEN Transmission's growth is driven by increasing demand for electricity across northern Scotland, supported by the Scottish Government's commitment to reducing carbon emissions and investing in renewable energy infrastructure development.

Corporate Unallocated

Expected Growth: 4.7%

SSE plc's Corporate Unallocated segment is expected to grow due to increasing central costs and unallocated items, driven by the company's expansion efforts and investments in renewable energy, as well as its focus on improving operational efficiency.

Intrasegment Revenue

Expected Growth: 5.6%

SSE plc's internal business units' revenue growth is driven by increasing demand for renewable energy, infrastructure investments, and cost savings from operational efficiencies.

SSE Enterprise

Expected Growth: 5.6%

SSE Enterprise’s growth is expected to be driven by increasing demand for low-carbon energy solutions and expansion of gas distribution services across the UK, supported by the UK government’s target to reach net-zero carbon status by 2050.

7. Detailed Products

Electricity

SSE plc provides electricity to homes and businesses across the UK and Ireland.

Gas

SSE plc supplies gas to homes and businesses across the UK and Ireland.

Renewable Energy

SSE plc generates renewable energy from wind, hydro, and biomass sources.

Energy Storage

SSE plc offers energy storage solutions for homes and businesses.

Smart Meters

SSE plc installs and manages smart meters for homes and businesses.

Energy Services

SSE plc offers energy services, including energy audits, energy efficiency solutions, and energy management.

Telecoms

SSE plc provides telecoms services, including fibre broadband and phone services.

8. SSE plc's Porter Forces

Forces Ranking

Threat Of Substitutes

SSE plc operates in the energy sector, which has few substitutes. However, there is a growing trend towards renewable energy sources, which could pose a threat to SSE's traditional business model.

Bargaining Power Of Customers

SSE plc has a large customer base, but individual customers have limited bargaining power. However, large commercial customers may have more negotiating power.

Bargaining Power Of Suppliers

SSE plc relies on a diverse range of suppliers for fuel, equipment, and services. While some suppliers may have bargaining power, SSE's scale and diversification mitigate this risk.

Threat Of New Entrants

The energy sector has high barriers to entry, including significant capital requirements and regulatory hurdles. New entrants are unlikely to pose a significant threat to SSE plc.

Intensity Of Rivalry

The energy sector is highly competitive, with several established players competing for market share. SSE plc faces intense rivalry from companies such as British Gas, EDF Energy, and npower.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 53.83%
Debt Cost 4.61%
Equity Weight 46.17%
Equity Cost 6.77%
WACC 5.61%
Leverage 116.59%

11. Quality Control: SSE plc passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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ENGIE

A-Score: 7.2/10

Value: 7.0

Growth: 5.6

Quality: 3.6

Yield: 10.0

Momentum: 7.0

Volatility: 10.0

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Enel

A-Score: 6.6/10

Value: 5.4

Growth: 5.1

Quality: 4.8

Yield: 8.1

Momentum: 6.5

Volatility: 10.0

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E.ON

A-Score: 6.6/10

Value: 7.3

Growth: 4.8

Quality: 3.2

Yield: 6.9

Momentum: 8.0

Volatility: 9.3

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RWE

A-Score: 6.6/10

Value: 8.1

Growth: 5.4

Quality: 3.8

Yield: 5.0

Momentum: 8.0

Volatility: 9.0

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Iberdrola

A-Score: 6.2/10

Value: 3.7

Growth: 5.4

Quality: 4.6

Yield: 6.2

Momentum: 7.0

Volatility: 10.0

1-Year Total Return ->

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SSE

A-Score: 5.8/10

Value: 5.9

Growth: 4.9

Quality: 4.5

Yield: 6.9

Momentum: 3.5

Volatility: 9.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

21.63$

Current Price

21.63$

Potential

-0.00%

Expected Cash-Flows