Overall view on the call: Messaging from the incoming CEO was good in our view, comments on numbers and FY27 guidance were supportive, but there was a lingering question on why capex cuts haven''t translated into lower leverage, and the call drew greater attention to the quite significant writedown in the southern European business. New CEO Martin Pibworth demonstrated a good awareness of current investor concerns - reassuring on zonal pricing impacts, emphasising value over volume (alongside a renewables capex cut today), and arguing the business can still grow amidst a more polarised political debate on UK clean energy. But with the co guiding to around 4x ND/EBITDA in FY27 we think balance sheet will remain in focus, although we think there is no imminent need to raise, nor much likelihood of a raise happening at the current share price.
Key points from the call:
. Zonal pricing. Not going to have an impact on SSE transmission buildout in the near term inc. ASTI and LOTI projects. Would expect some grandfathering for generation if it is implemented. Have flexible plant in southern zones which could benefit from higher prices if it happens. Should not take negative view on zonal pricing as an indicator that it''s significantly negative for SSE. A subtle tightening up of the messaging ... from previously ''this is really bad'' to ''this is really bad for the system but not necessarily that bad for us''
. New CEO key priorities. Currently focused on big policy announcements due in the next few months: zonal pricing decision, RIIO-T3 regulatory review, AR7 CfD auction round. Still positioning the business as a UK-Ireland clean energy champion. Focused on continuity and delivering the existing plan. Too early to commit to a CMD/strat update date due to unclear timing of policy announcements.
. GBP3bn capex guidance cut. GBP1.5bn comes from less renewables spend including slowdown in southern Europe, and big offshore wind development projects progressing...
