Alistair Phillips-Davies has told Utility Week the plan to sell a 25% stake in SSEN Distribution is off the table, at least for the next few years.
The company sold a quarter of its holding in the transmission business in November for almost £1.5 billion and had expected to kick off the process to do the same with the distribution arm this year.
However, in its preliminary results for the year to 31 March, the company said its strategy was now based on retaining 100% of its distribution network, which delivered a 9% increase in profits over the year – to £382.4 million.
He said: “When we look forward at our investment plans and at what we want to do in terms of the transformation of that business, we don’t need to sell it at this point in time.”
He added: “Later on in the decade we may come back to that decision. We were certainly delighted with the transmission sale process. But there’s no need to do it now. There are lots of other things to focus on, including the investment and the new ED2 settlement we’ve got in that business.”
Phillips-Davies also insisted the notion of spinning off the renewables business – favoured by some investors, most notably hedge fund Elliott – was definitely off the table, saying this had been an “irrelevant distraction”.
He said: “There’s a real strength in this group from having exposure to this transition up and down the chain. We think the shape of the group is exactly right.”
Across the group, pre-tax profits increased from £1.2 billion last year to £2.2 billion in the past year. The biggest jump was seen in the thermal and gas storage business, where profits rose £331 million to £1.2 billion year-on-year.
The company paid out £43.4 million under the Electricity Generator Levy, the government scheme to tax companies 45% on returns from generation in excess of a £75/MWh benchmark. This only covers the last three months of the year when the scheme came in. Asked to defend the disparity between profits from gas storage and the amount paid out via the levy, Phillips-Davies stressed there were “no windfall profits there” and pointed to investment levels during the past year of £2.8 billion.
He added: “What we’re doing as a company is investing far more than we’re making to ensure we get away from that gas crisis. We’ve invested in businesses, be they gas storage or flexible thermal generation, that have not made particularly good returns in the past. Those assets were critical in keeping the lights on over the last year. We’ve earned some money out of them but the important thing is those profits were made with a clear purpose.”
The group updated its long-term investment strategy, the Net Zero Acceleration Plan, which was first unveiled 18 months ago and now stands at an estimated £18 billion to be spent by 2027. Some 30% of this will be through SSEN Transmission with a further 20% coming from the distribution arm. The regulatory asset value of the combined networks business is set to grow from £8.2 billion to as much as £14 billion during the lifetime of the plan.