ii view: SSE renewable production gusts higher

Full-year trading update to 31 March

• Renewables energy production up 10% year-over-year

Guidance:

• Now expects full-year 2025-26 adjusted earnings of between 147p and 152p per share, narrowed from a previous 144p to 152p per share.

ii round-up:

SSE (LSE:SSE) today reported higher renewable energy production with the company, which has its headquarters in Perth, Scotland, narrowing expected annual earnings ahead of full-year results due on 28 May. 

Renewable energy production for the full year to late March of around 14.5 terawatt hours (TWh) is up 10% from the prior year, pushed by ongoing investment in newly installed wind turbines. Full-year earnings of 147 to 154p per share came in from its previous 144 to 154p per share estimate.

Against a backdrop of weaker markets and concern over the ongoing war in the Middle East, SSE shares fell marginally in UK trading having come into this latest news up by a fifth so far in 2026. That’s similar to nuclear power play Centrica (LSE:CNA) and ahead of a 3% gain for the FTSE 100 index year-to-date. 

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

Management highlighted a close monitoring of developments in the Middle East, although with no immediate impact to the group’s performance so far, which is aided by its resilient business mix.

A previously announced £33 billion five-year investment programme had underpinned a 60% increase in transmission network investments made over the year with five of its 11 major projects now under construction. 

Capital investment for the year to late March is expected to total £3.5 billion with adjusted net debt and hybrid capital forecast to come in at just over £10 billion and down from £11.4 billion in late September. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares after the news, upping its estimate of fair value to £29.50 from a previous £27 per share.

ii view:

Formed via the merger of Southern Electric and Scottish Hydro Electric, SSE today employs over 15,000 people. Regulated Networks accounted for around two-thirds of adjusted operating profits during the first half to late September, with gas and renewable generation most of the balance. Geographically, the UK dominates, at around 80% of revenues during the last financial year, with Ireland the balance. 

For investors, the cost of investments is likely to weigh on earnings in the short to medium term. Renewable energy production is subject to weather conditions. Negotiations with the UK regulator offer regular periodic uncertainty, while an estimated future price/earnings (PE) ratio above the three and 10-year averages may suggest that the shares are not obviously cheap.  

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On the upside, existing and soon-to-be extended transmission networks offer a relatively high degree of profit predictability given broadly predictable energy usage. 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 cash flows, while dividend increases of between 5% to 10% are being targeted. 

On balance, SSE’s ownership and investment in UK infrastructure combined with an estimated future dividend yield of around 2.6% will likely keep investors interested.   

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