Hedge fund Elliott Management has launched a blistering attack on SSE and called for sweeping changes at the renewable energy giant.
The New York-based activist, run by feared financier Paul Singer, demanded the company appoint two new board directors and reconsider splitting the firm in two.
Elliott, a top five investor in SSE, wants the FTSE 100 company to separate out its renewables arm, which is one of the world’s biggest developers of wind power.
Attack: Hedge fund Elliott Management, run by feared financier Paul Singer (pictured), demanded SSE appoint two new board directors and reconsider splitting the company in two
Last month SSE rejected these calls, doubling down on existing plans by pledging an additional £1billion of funding on green investments every year to 2026, and cutting its dividend.
But in a ten-page letter, Elliott yesterday slammed this strategy, saying it ‘lacked ambition and disappointed your shareholders as well as many analysts and media commentators who were expecting more’.
SSE’s networks business runs electricity networks in Scotland and parts of England. The renewables business, in contrast, builds wind farms and other renewables infrastructure.
It is playing a major role in the Dogger Bank wind farm, which is being developed off the coast of Hull and will be the largest in the world.
SSE, which is based in Perth in Scotland, is one of several British companies that Elliott has trained its sights on in recent years.
Investment: SSE is playing a major role in the Dogger Bank wind farm – which is being developed off the coast of Hull and will be the largest in the world
The hedge fund, known for its aggressive tactics, pushed Whitbread to sell its Costa Coffee arm and is targeting GlaxoSmithKline, where it wants chief executive Emma Walmsley to reapply for her role once the company splits into two businesses, one focused on pharmaceuticals and the other on consumer goods.
Elliott partners Nabeel Bhanji and Jeff Rosenbaum, who authored the letter to SSE chairman Sir John Manzoni, believe the energy firm is undervalued by £5billion because of its ‘inefficient conglomerate structure’ and that keeping the businesses in one firm was a ‘missed opportunity’.
They also lashed out at SSE’s ‘inadequate board’, which does not contain independent directors who have experience in renewables, calling for two new appointees with expertise in the field who could conduct a strategic review of the company.
SSE chief executive Alistair Phillips-Davies swiftly rejected Elliott’s latest swipe.
Phillips-Davies has repeatedly said the only way it could afford to ramp up its renewables investments is to have the guaranteed income from the networks arm. He also said a separation could hamper the UK’s ability to reach its target of net zero by 2050.
He added: ‘Separation would jeopardise our ability to finance and deliver the major infrastructure the UK needs to create jobs and achieve net zero, and would lose shared skills that benefit the group.’
SSE wants to be a world leader in renewable power and has already been selling parts of its business. It sold its household energy arm SSE Energy Services to challenger group Ovo Energy for £500million last year.
Reports that Elliott had taken a stake in SSE emerged in August.
It has said it is a ‘top five’ shareholder, though it has not said how much this is. It is thought to be anything between 3.5 per cent and 5 per cent – as SSE’s other major shareholders are all around this level and if a stake reaches 5 per cent then the investor must declare it to the stock market.