ii view: weather-hit SSE continues to grow

First-quarter trading update to 30 June

Chief executive Alistair Phillips-Davies said:

"Today is my final AGM as Chief Executive and it has been a privilege to lead SSE's transformation into a national clean energy champion. Through the hard work and talent of countless colleagues over the years, we have aligned the Group with an energy transition that is creating value for both shareholders and society.”

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ii round-up:

Power generation and electricity transmission company SSE (LSE:SSE) today detailed a 4% decline in renewable energy production due to unfavourable weather conditions in April and May. 

A drop in hydro power exceeded increased onshore wind production, with the Perth, Scotland headquartered group reiterating its estimate for adjusted earnings for the financial year to late March 2027 of between 175p and 200p per share. That’s potentially up from last year’s 160.9p per share.

Shares in the FTSE 100 company fell marginally in UK trading having come into this latest news up 15% in 2025. That’s similar to British Gas owner Centrica (LSE:CNA). The FTSE 100 index is up 8% so far in 2025.

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

Management pointed to significant progress in delivering a £17.5 billion five-year investment programme out to 2027. 

A 66th turbine is close to being installed at its Dogger Bank offshore wind farm, with all 95 turbines expected to be installed by the fourth quarter of this financial year.  

A decision to build the Platin hydrotreated vegetable oil power station at County Meath in Ireland had also been made. Generating 170 megawatts, the plant is expected to cost £300 million and be completed in 2028. 

Broker UBS reiterated its ‘buy’ rating on the shares post the news. A first-half trading update is scheduled for 2 October. 

ii view:

SSE was formed via the merger of Southern Electric and Scottish Hydro Electric. The UK’s biggest generator of renewable power, operations such as wind farms continue to be expanded under the group’s Net Zero Acceleration Programme (NZAP). Other existing or under construction renewable operations also includes facilities in Ireland, France, Spain and Italy. SSE executive Martin Pibworth now succeeds Alistair Phillips-Davies as CEO. 

For investors, renewable energy production is subject to weather conditions. A previous reduction and readjustment of the group’s investment plans toward transmission networks and away from renewable energy may reduce SSE’s environmental appeal. An estimated price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap, while a previous reduction in the dividend payment to fund NZAP has seen the dividend yield drop from over 5% to a current estimated future yield of just under 4%.  

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To the upside, ongoing wind farm construction helped deliver an 18% increase in energy production over its last financial year. A previously announced cut in investment expenditure to £17.5 billion from £20.5 billion potentially helps ease balance sheet concerns. A diverse portfolio of generating and other assets are held, while dividend increases of between 5& and 10% per year are being targeted to 2027. 

On balance, and with strong cashflows backing dividend payments, this major UK utility company continues to justify its place in many diversified investor portfolios. 

Positives

• Expanding asset base
• Progress dividend payment

Negatives

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

The average rating of stock market analysts:

Buy