SSE hits back after activist attack
Investors in “energy behemoth” SSE have struck back after hedge fund Elliott Management tried to force a break-up of the firm, say Sabah Meddings and Jamie Nimmo in The Sunday Times. Last week the hedge fund called for a reorganisation of the board as well as the sale “of a larger stake in SSE’s electricity networks business and the partial listing or sale of a stake in its renewables business”.
However, other large SSE investors disagree with Elliot’s plan. UK boards tend to “capitulate quickly” in the face of such “aggressive attacks” from activist investors, says Ben Marlow in The Daily Telegraph. But SSE has come out fighting, with its CEO Alistair Phillips-Davies issuing a “comprehensive rebuttal” of Elliott’s demands. He says a “standalone renewables arm would suffer devastatingly higher borrowing costs”. These higher costs “would make it harder to finance major projects, including Dogger Bank Wind Farm, which will be the biggest wind farm in the world when it is completed”.
SSE is right to say that “it’s cheaper to finance the construction of more renewables assets, primarily offshore wind farms”, when “the division is housed under the same roof as a networks and distribution division that throws off cash reliably”, says Nils Pratley in The Guardian. The company is “not going to be bullied easily by an activist that... owns less than 5% of the share capital”. Still, when it comes to the board, Elliott’s arguments are “stronger”: if you look down the list of nonexecutive directors, “it’s not obvious who the renewable specialists are supposed to be”.