Investors are increasingly intrigued by the energy provider SSE as the company embarks on a transformative £33 billion investment program. This initiative aims to enhance its capacity for generating renewable energy and upgrading electricity transmission networks across southern England and Scotland. While utility companies often represent stable, defensive investments, SSE’s strategic approach sets it apart from its competitors.
Utility companies, responsible for essential services like electricity, water, and gas, typically demonstrate consistent demand even in economic downturns. However, they often grow at a slower pace during periods of economic expansion, making them attractive primarily for their dividends rather than capital growth. SSE challenges this notion by pursuing aggressive growth strategies in response to the ongoing transition to a low-carbon economy.
Renewable Energy Focus
SSE’s core business includes delivering electricity across southern England and Scotland. The company is committed to increasing its renewable energy generation, driven by a belief that consumers will pay a premium for greener options. Approximately one-third of the planned investment will support this transition, while the majority—around two-thirds—will focus on upgrading the electricity transmission network.
This upgrade is crucial for connecting renewable energy producers to the national grid, facilitating the transport of electricity to areas of demand. If SSE successfully executes its infrastructure projects on time and within budget, the company anticipates substantial returns on these investments.
Nonetheless, SSE’s strategy carries inherent risks. The firm’s success relies on maintaining stable energy prices and sustaining strong demand for renewable energy. Despite these uncertainties, the potential for significant growth is evident, particularly as sectors like data centers and electric vehicles drive increased electricity demand.
Strong Financial Performance
SSE’s growth strategy appears to be yielding positive results. The company’s revenue surged by nearly 50% from 2021 to 2025, while normalized earnings per share more than doubled during the same period. Management projects continued growth, with earnings per share expected to rise by 7% to 9% annually over the next five years. This growth trajectory could facilitate annual dividend increases of up to 10%.
Despite these optimistic projections, SSE’s shares are trading at a relatively low price-to-earnings ratio of 14 times estimated earnings for 2027. The stock also offers a solid dividend yield of 2.8%. Investor sentiment has shifted positively, reflected in a 26% rise in share price over the past six months and an impressive 44% increase over the past year. Furthermore, SSE shares are currently trading above both their 50-day and 200-day moving averages.
In light of these developments, some analysts recommend taking a long position at the current share price of 2,596p. A suggested stop-loss point is set at 1,600p, which would limit potential losses to approximately £996.
The momentum behind SSE’s ambitious plans and its focus on renewable energy have captured the attention of investors. As the transition to a low-carbon economy continues to unfold, SSE’s strategic investments may position it favorably within the evolving energy landscape.
This article was originally published in MoneyWeek’s magazine, offering insights and analysis from a team of financial experts dedicated to keeping investors informed.
