Activist hedge fund calls for dismantling of ESS

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Activist hedge fund Elliott Management has publicly called for the disbandment of Scottish energy giant SSE – a move it says could add more than £ 5 billion to the value of the company.

Yesterday, the company said it was unimpressed with a plan SSE announced last month that would pay an additional £ 1bn a year into wind farms and other investments.

After months of lobbying bosses behind closed doors, the US hedge fund launched a public offensive against the company on Monday.

“We believe the market is ignoring £ 5bn of value due to the inefficient structure of the ESS,” one read.

A split would allow a 30% jump from today’s valuation.

Elliott’s argument rests on a key point, which he claims many of the FTSE 100’s competitors have already accepted.

The business currently consists of two main parts: a company which builds wind turbines and other sources of renewable energy production, and a company which operates the electricity grids in parts of the UK.

But analysts say the two companies would attract very distinct investors if they were separated.

Investors looking for dividend stability would happily put their money in the grids arm, while those looking for the company to invest and grow quickly would throw money into the renewables arm – but have both. together could put off both types of investors.

“Both companies would be able to clearly tell their own equity stories and focus on execution and the proper allocation of capital,” Elliott said in a letter to the president of SSE.

“As a result, investors could measure each entity at its fair value without applying a conglomerate haircut. “

SSE chief executive Alistair Phillips-Davies said he developed the group’s strategy which was released last month, after speaking to shareholders and taking independent advice.

“Separation risks jeopardizing valuable growth options along the clean energy value chain, jeopardizing our ability to finance and deliver the key infrastructure the UK needs to create jobs and reach net zero, and lose shared skills that benefit the group, ”he said.

“The separation does not support the funding of our core growth activities and would exclude adjacent growth options, while reducing the resilience of the business model – it is not the right outcome to maximize shareholder value or our other stakeholders. “

Sources familiar with the situation have suggested that the most important thing SSE could do to appease Elliott would be to appoint board members with experience in the renewable energy sector.

In his letter, Elliott said that SSE’s board of directors was “insufficient”, adding: “none of the independent members of the SSE board have significant operational experience in growing a large company. renewable energies.

“This lack of expertise places the company at a significant disadvantage compared to its competitors.”

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