SSE sells minority stake in transmissions business to Canadian pension fund for £1.5bn

A 25% stake in SSE’s (LON: SSE) electricity transmission business has been snapped up by a Canadian pensions fund for over £1 billion.

A deal has been struck with Ontario Teachers’ Pension Plan Board for the minority share in SSEN Transmissions, which operates under its licenced entity, Scottish Hydro Electric Transmission.

SSE says the transaction will help to “unlock significant growth” in the division, as well as across the wider group.

It follows SSE’s recent announcement of its intention to extend the partnering approach that has been successful in SSE Renewables.

Covering the core electricity distribution and transmission network assets, the process involves farming out minority stakes in both businesses, as part of SSE’s Net Zero Acceleration Programme (NZAP).

The stake sale process for SSE’s electricity distribution business is expected to commence in early 2023.

Based on the “effective economic date” of March 31, the Ontario Teachers deals will net SSE total cash proceeds of £1.465bn – the transaction is expected to complete shortly.

The group says the successful transaction reflects “both the current value and significant growth potential of SSEN Transmission”.

It also claims the division has a “central role to play in meeting net zero and bolstering the UK’s energy security” by tapping home-grown renewables in Scotland and distributing power to demand centres further south.

Gregor Alexander, Finance Director of SSE, said: “We are delighted to agree a transaction that will help unlock the full potential of our growing electricity transmission business, which remains core to our strategic direction as a clean energy champion specialising in electricity infrastructure.

© Supplied by Kenny Smith/ DC Thom

“As we set out in our Net Zero Acceleration Programme last year, due to the scale of potential growth and the associated investment required across SSE’s businesses, including in electricity networks, bringing in minority partners will balance capital allocation and support further growth, creating greater long-term value for all our stakeholders.

“In Ontario Teachers’ we have a strong long-term partner who we have worked with successfully over the past 18 years and, whilst we will retain operational control, they will be critical to SSEN Transmission’s ongoing future success.”

The proceeds released through this stake sale will underpin future growth in SSEN Transmission, while ensuring an attractive balance of capital allocation across the group.

SSE’s NZAP creates a platform to deliver as much as 20% of the offshore wind generation and electricity networks needed in the UK by 2030.

That is alongside investments in flexible generation technology and the export of SSE’s renewable energy capabilities internationally.

© Supplied by SSE Renewables

In Britain alone, SSE’s investment could exceed £24bn this decade, “directly alleviating” the UK’s energy crisis, the company said.

Rob McDonald, Managing Director of SSEN Transmission, said: “With the north of Scotland home to the UK’s greatest resources of renewable electricity we have a critical role to play in helping deliver the UK and Scottish Governments net zero commitments.  Our investments will also be key to securing the UK’s future energy independence through enabling the deployment of homegrown, affordable, low carbon power.

“With significant growth forecast in transmission, bringing in Ontario Teachers’ as a minority stake partner will help fund our ambitious investment plans as we continue to deliver a network for net zero emissions across the north of Scotland.”