LONDON, UK: SSE plc has reached settlement to promote a 25% minority stake in its electrical energy transmission community business, SSEN Transmission – which operates under its licenced entity, Scottish Hydro Electric Transmission plc.
The transaction is based on an efficient financial date of 31 March 2022, and total money proceeds of £1.465 billion for the 25% stake are anticipated at completion. The transaction is anticipated to full shortly.
The stake sale course of for SSE’s electrical energy distribution enterprise is anticipated to commence in early 2023.
The enterprise is being sold to Ontario Teachers’ Pension Plan Board (Ontario Teachers’) in a transaction that will assist unlock significant growth in each the Transmission enterprise and throughout the broader SSE Group.
The transaction follows SSE’s announcement on 17 November 2021 of its intention to increase the partnering approach that has been profitable in SSE Renewables to its core electrical energy distribution and transmission community assets through the sale of minority stakes in each companies as a half of SSE’s fully funded Net Zero Acceleration Programme (NZAP).
As at 31 March 2022, SSEN Transmission had a RAV of £4,155m (with RAV at 31 March 2023 forecast to be almost £5bn) and net debt and debt-like items of £2,488m, collectively with £780m of SSE shareholder loans. These shareholder loans to SSEN Transmission will stay in place and are anticipated to get changed with exterior debt as they mature.
This profitable transaction displays each the present worth and significant growth potential of SSEN Transmission as one of Europe’s quickest rising transmission networks. SSE continues to believe SSEN Transmission has a central role to play in assembly net zero and bolstering the UK’s energy safety by unlocking the huge renewable resources within the north of Scotland and transporting that homegrown low carbon energy to demand centres additional south.
SSEN Transmission’s RIIO-T2 baseline funding case of circa £2.6bn (the ‘Certain View’), collectively with additional investments anticipated to be unlocked through Ofgem’s Uncertainty Mechanisms, is forecast to ship gross RAV of £6.5-£7.0bn by 2026. Longer term, topic to projects progressing through planning and regulation, SSE expects SSEN Transmission’s gross RAV to exceed £12bn by 2031. This growth is anticipated to be supported by the publication of Ofgem’s Accelerated Strategic Transmission Investment framework later this year and the Electricity System Operator’s Holistic Network Design Follow Up Exercise which is anticipated to be published in spring subsequent year.
The proceeds launched through this stake sale will support the numerous growth SSE continues to see in SSEN Transmission and additional growth alternatives throughout SSE’s different core businesses, whereas ensuring an attractive balance of capital allocation throughout the Group.
SSE’s NZAP creates the platform that could see the Group ship round 20% of the offshore wind generation and electrical energy networks wanted within the UK by 2030, alongside investments in versatile generation technology and the export of SSE’s renewable energy capabilities internationally. In Great Britain alone, SSE’s funding could exceed £24bn this decade, directly assuaging the UK’s energy crisis.
The sale of a minority stake will allow SSE because the bulk shareholder to retain management in relation to working and managing the business, with Ontario Teachers’ to be proportionately represented on SSEN Transmission’s Board of Directors. SSE’s Finance Director Gregor Alexander will be Chair of this new Board and Rob McDonald will proceed in his role as Managing Director for SSEN Transmission, collectively with different key members of SSEN Transmission’s Leadership Team.
To assist cowl the future lengthy run funding necessities and the working capital of SSEN Transmission, and as referenced in SSE’s 2022/23 Interim Results, a brand new £750m revolving credit score facility has been put in place. This facility will support SSEN Transmission’s ongoing capital expenditure funding programme that’s required to ship its ambitious growth plans.
Gregor Alexander, Finance Director of SSE, said: “We are delighted to agree a transaction that will assist unlock the full potential of our rising electrical energy transmission business, which stays core to our strategic direction as a clear energy champion specialising in electrical energy infrastructure.
“As we set out in our Net Zero Acceleration Programme final year, due to the scale of potential growth and the related funding required throughout SSE’s businesses, collectively with in electrical energy networks, bringing in minority companions will balance capital allocation and support additional growth, creating greater long-term worth for all our stakeholders.
“In Ontario Teachers’ we have a strong long-term partner who we have labored with efficiently over the previous 18 years and, whereas we will retain operational control, they are going to be critical to SSEN Transmission’s ongoing future success.”
Rob McDonald, Managing Director of SSEN Transmission, said: “With the north of Scotland home to the UK’s greatest resources of renewable electrical energy we have a critical role to play in serving to ship the UK and Scottish Governments net zero commitments. Our investments will even be key to securing the UK’s future energy independence through enabling the deployment of homegrown, affordable, low carbon power.
“With significant growth forecast in transmission, bringing in Ontario Teachers’ as a minority stake partner will assist fund our ambitious funding plans as we proceed to ship a community for net zero emissions throughout the north of Scotland.”
Charles Thomazi, Head of EMEA Infrastructure & Natural Resources at Ontario Teachers’, said: “SSEN Transmission is one of Europe’s quickest rising transmission networks. Its community stretches throughout a few of the most difficult terrain in Scotland – from the North Sea and throughout the Highlands – to ship safe, reliable, renewable energy to demand centres throughout the UK.
“We’re delighted to partner once more with SSE and are dedicated to supporting the expansion of its community and the vital role it performs within the UK’s inexperienced energy revolution.”
In the 12 months to 31 March 2022, SSEN Transmission made an adjusted working revenue of £380.9m, with reported pre-tax revenue of £329.8m. At 30 September 2022, SSEN Transmission had gross assets of £4,716.1m and net assets of £2,242.8m.
The Transaction constitutes a category 2 transaction for the needs of the UK Financial Conduct Authority’s Listing Rules and, as such, doesn’t require SSE shareholders’ approval.
Morgan Stanley and Rothschild and Co acted as SSE’s joint monetary advisors and Freshfields Bruckhaus Deringer LLP acted as authorized advisers to SSE on this transaction.
Ontario Teachers’ was suggested by Evercore as sole monetary adviser and by Linklaters LLP as authorized adviser.