Britain’s second-biggest energy supplier, SSE, is considering selling up to a third of its 50 per cent stake in regional gas distribution business SGN to raise cash for shareholders or to reinvest, it said on Wednesday.
The plan to sell down its interest in SGN, the operator of two regional gas networks, in Scotland and southern England, follows a similar move by National Grid, which is seeking to sell a majority stake in its own £8.5 billion UK gas networks business.
SSE could raise around £1 billion from its sale, based on a 20 per cent premium to the regulated asset base value of SGN, analysts at Jefferies said. SGN is co-owned by two Canadian pension fund investors, Ontario Teachers’ Pension Plan and Borealis.
SSE also reported on Wednesday a 3.3 per cent fall in full-year adjusted pre-tax profits to £1.5 billion after making hefty impairment charges on the value of its coal and gas-fired power plants as well as its gas production business due to weak energy prices.
Like its biggest rival, Centrica, SSE has lost many customers in its retail business mainly to smaller and often cheaper suppliers who now control 15.4 percent of the dual gas-electricity fuel market, up from just 1 per cent four years ago.
SSE’s total customer accounts in Britain and Ireland fell to 8.21 million at the end of March, 370,000 accounts lower than the same time last year. In comparison, Centrica’s British Gas lost 119,000 accounts in its 2015 financial year and another 224,000 over the course of the first three months of 2016.
The utility raised its dividend for the year by 1.1 per cent to 89.4 pence per share, in line with expectations, and pledged to keep dividend increases at least in line with the UK’s Retail Price Index (RPI) rate of inflation in 2016/17 and beyond. However, Jefferies analysts said the dividend could be under threat if British power prices do not rise from current levels.
“Even a modest move up in prices to the 45-50 pounds per MWh range would alleviate much of the pressure,” they said. “But if that doesn’t happen, then SSE’s ability to maintain investment at this rate and its dividend will be called into question.”
Shares in SSE were down 0.6 per cent at 1,537 pence by 0827 GMT.
Reuters
