First Read: SSE PLC "Very little new to report" (Neutral) Freshney

Research evidence excerpt

First Read: SSE PLC "Very little new to report" (Neutral) Freshney

Forecast returns

Forecast price appreciation -3.3%

Forecast dividend yield 2.9%

Forecast stock return -0.4%

Market return assumption 9.2%

Forecast excess return -9.5%

Company Description

SSE's core businesses are regulated UK energy networks and renewable generation, with the

remainder being made up of flexible thermal generation capacity, energy supply in GB/Ireland

and related energy services. SSE operates transmission and distribution network assets with

c£11.1bn RAB (FY24, year-end March) and is one of the UK's largest renewable generators,

with aspirations to triple renewable output over 2023-27.

Valuation Method and Risk Statement

O

E.ON:

The main drivers of the Utilities sector include: commodities, generation margins, demand

evolution, regulatory changes, M&A, regulation, government policy, credit conditions and

currency movements. Any adverse change in these would modify our view on these stocks.

Company-specific risks for e.on include unfavourable changes to regulatory frameworks in

networks; increased competition in retail or deterioration in payments behaviour. Our e.on

price target is derived from a DCF-based sum of the parts approach cross-checked with

relative multiples.

National Grid:

National Grid runs regulated energy delivery networks in both the US and the UK. The UK is

electricity transmission and distribution. The US is electricity and gas distribution, and

electricity transmission. A key risk is from the actions of regulators in either country, which can

impact prices, returns and valuations. National Grid is responsible for delivering essential

energy services, so is at risk from operational failings, which can have a financial or

reputational impact.