ii view: momentum at SSE amid renewables boost

First-quarter trading update to 30 June

• Renewable energy production up 31% year-over-year
• Investment in networks up 83% year-over-year

Guidance:

• Continues to expect adjusted earnings per share (EPS) of 168-193p for the current full year versus 161p a year ago
• Continues to expect adjusted EPS of 225-250p for full year 2029/2030

Chief financial officer Barry O'Regan said:

"Since announcing our £33 billion investment programme to unlock the enormous growth opportunity of UK electricity networks, we are continuing to see real progress as we work to deliver the plan, and in doing so we are underpinning compounding, long-term earnings growth and creating significant value for investors."

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ii round-up:

SSE (LSE:SSE) today maintained forecasts for growth in earnings, with the utility company reporting a near one-third increase in renewable energy production.

An 83% hike in network related investments during the first quarter to late June underpins expected record annual investment of £5 billion. That’s forecast to support adjusted earnings per share of between 168p and 193p in the financial year to March 2027, up from last year’s 153.5p.

Shares in the FTSE 100 company lost 1% in UK trading having come into this latest news up by just over a tenth so far in 2026. Networks and transmission mammoth National Grid (LSE:NG.) has risen by a similar amount. The FTSE 100 index is up 5% year-to-date.

SSE operations include renewable and traditional gas-powered generation plants as well as transmission and supply networks across the UK.

The trading update came alongside news that former National Grid head John Pettigrew is to join SSE as an independent non-executive director.

Renewable energy production of 3.26 terawatt hours (TWh) for the quarter came as hydro generation more than doubled. Better wind conditions and the installation of more turbines added 18% and 14% respectively to onshore and offshore wind output.

Management continues to expect the ongoing five-year £33 billion investment programme to generate earnings of between 225p and 250p over the plan's final 2029/2030 financial year.

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the news, flagging a target price of £29 per share.

ii view:

Formed via the merger of Southern Electric and Scottish Hydro Electric, SSE today employs over 15,000 people. Renewable energy generation accounted for most profits over its last financial year at 46%. That was followed by networks or transmission and distribution at 38%, with so called ‘flexible’ profits, and including thermal generation and customer supply, the balance of 16%.  

For investors, the cost of investments will weigh on possible earnings in the short to medium term. Renewable energy production is subject to weather conditions. Negotiations with the UK regulator offer periodic uncertainty, while a forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap.  

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More favourably, existing and future extension of transmission networks offer a relatively high degree of predictable profit given known trends in energy use. A diverse portfolio of generating and other assets are held. The bulk or 55% of this major investment programme is being funded from day-to-day operations and cashflows, while dividend increases of between 5% and 10% are being targeted.

In all, SSE’s ownership and investment in UK infrastructure combined with a forecast dividend yield of around 3% should keep investors interested in this major UK utility company.  

Positives

• Expanding asset base
• Attractive dividend yield (not guaranteed)

Negatives

• Subject to regulatory rulings
• Previous target of government windfall tax  

The average rating of stock market analysts:

Buy