As Britain’s self-professed “clean energy champion” it is reassuring that SSE is generating a lot of wind. If only it was all down to the storms battering Britain.
The Scottish energy supplier is the latest recipient of what amounts to little more than a blast of hot air from feared Wall Street activist investor Elliott Management, as it steps up a campaign to force SSE to break itself up.
It’s textbook “gloves off” stuff. Having tried but failed in private to persuade the FTSE 100 company to separate its windfarms and hydro power operations from a heavily regulated distribution business that delivers electricity into millions of homes, Elliott has gone for the jugular, attacking management’s track record and laying out the financial rationale for splitting SSE in two.
There has been a tendency among UK boards to capitulate quickly in the face of attacks like this, especially when it becomes a public spat and turns personal. Elliott is particularly aggressive if it doesn’t get its own way, often laying siege to companies until they cave in.
But as City outfit Alvarez and Marsal predicts a forthcoming “golden age” for activists, it is worth remembering that most are fly-by-night merchants looking to make a quick buck, often armed with little more than shares borrowed in the market, rather than long-term investor-owners.
The idea that their motives are aligned with the interests of other so-called stakeholders is plainly nonsense.
Under-fire bosses should also bear in mind that it is perfectly possible to repel corporate raiders like Elliott by standing firm. Though Jes Staley is likely to be best remembered for his friendship with notorious, and now deceased, paedophile Jeffrey Epstein, the way he successfully saw off activist Ed Bramson, is to be warmly applauded.
Let’s hope there is more resistance. Companies shouldn’t be allowed to rest on their laurels but it is disheartening to see short-term hedge funds driving change rather than institutional shareholders.
Why do so few fund managers lack the courage to lead the charge, yet are happy to facilitate the simplistic get-rich-quick schemes of activists either with a nod-and-a-wink behind the scenes, or worse, by lending the shares needed to legitimise their cause?
To his credit, SSE boss Allistair Phillips-Davies is sticking to his guns, but it’s not as if he’s presented a “business-as-usual” case to shareholders. Far from it. It’s simply that his “energy transition” strategy for creating value is different to the quick-fix shake-up that Elliott envisages.
SSE has unveiled a plan to ramp up capital expenditure across both divisions over the next five years, from £7.5bn to £12.5bn, including a 2.5-fold jump in renewables investment from £1.8bn to £5bn from day one.
By the end of the decade, the company expects to be in control of a quarter of the UK’s offshore wind farms, together with electricity grid networks in Scotland and England, and a collection of “low carbon” power plants.
