Activist investor Elliott Advisors has ramped up pressure on SSE to spin out its renewable energy business, claiming that the company is undervalued by £5bn.
Scottish energy firm SSE first rebuffed shareholder Elliott’s proposal that it spin out renewables in November.
At the time, the FTSE 100 group said it had “carefully considered” a range of options but concluded that spinning off the division was not in the long-term interests of stakeholders.
Instead it committed to sell a minority stake in its electricity networks business and announced a multi-billion pound plan to boost investment across both its renewables and networks divisions.
But on Tuesday the hedge fund confirmed it had written to SSE chairman John Manzoni, accusing the company of producing plans that “lacked ambition” and “disappointed” many shareholders, analysts and media commentators.
Fund managers Jeff Rosenbaum and Nabeel Bhanji argued SSE was worth £21 a share, roughly a 30% upside to the current share price, and that the company “could have unlocked £5bn of value” by listing the renewables business.
They also pointed to the blue chip’s share price performance since the 17 November announcement. The stock, which closed at 1,658p on 16 November, ended the month at 1,552p.
Rosenbaum and Bhanji have called on SSE to “restore shareholder confidence” by pursuing additional initiatives for value creation, including “a more ambitious disposal” of networks and either a partial listing or disposal of renewables.
They also want two independent directors with renewables experience to be appointed to the board, and the establishment of a strategic review committee, composed of independent board members, to oversee the new strategy.
They concluded: “We believe that, with the right steps, there is a clear path for the company to unlock £5bn of untapped value and establish its leadership positive as the UK’s renewables champion. We look forward to continuing our dialogue with the company.”
SSE has yet to comment on the letter.
As at 1100 GMT, shares in SSE were largely flat at 1,637p.
Elliott acquired its stake in SSE earlier this year. This is the first time it has publicly criticised the firm on its strategy.