SSE to Sell Energy Waste Plant Stakes For $1.3 Billion

(Bloomberg) -- SSE Plc rose after it agreed to sell its 50% stakes in two energy from waste ventures as part of its plan to focus on renewable generation.

The Scottish utility will sell its holdings in Multifuel Energy Ltd. and Multifuel Energy 2 Ltd. to the European Diversified Infrastructure Fund III, a fund managed by First Sentier Investors, for a total of 995 million pounds ($1.3 billion) in cash, the company said in a statement.

After the sale of its retail arm for 500 million pounds in January, SSE is restructuring to focus just on generation and networks. The company has 2.8 gigawatts of British offshore wind farms under construction as it tries to position itself as a leading developer of the technology.

The U.K. government wants to boost capacity to 40 gigawatts by 2030 from 10 gigawatts now. SSE gained as much as 4.8% to the highest since July before trading at 1,378.5 pence a share by 9:52 a.m. London.

In June 2020, SSE identified its interests in MEL1 and MEL2 as an early priority for sale as part of a strategy to secure at least 2 billion pounds from disposals by autumn 2021. The cash from the sale will help the company to invest 7.5 billion pounds in low-carbon energy infrastructure over the next five years.

“While these multifuel assets have been successful ventures for SSE, they are non-core investments and we are pleased to have agreed a sale that delivers significant value,” said Gregor Alexander, the company’s finance director.

The transaction is expected to complete by late 2020 subject to antitrust approval by the European Commission.

Analyst comments:

• SSE is now 75% of the way toward its autumn 2021 divestment target. “We continue to like SSE as a play on two structural growth opportunities; electricity networks and renewables, in particular the growth in U.K. offshore wind, and today’s divestment will support the company’s increased focus on these two areas and can be considered a positive,” Mark Nelson, analyst at Killik & Co. LLP said.
• SSE has improved its balance sheet outlook and is trading below RBC Europe Ltd.’s price target of 1,400 pence a share. “There are some positives in the energy transition and renewables growth opportunity in the U.K.,” John Musk, analyst at RBC said.

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