Background
When we invest in infrastructure companies at Milford, we look for essential assets, with durable growth and a fair entry price. British-based renewables and flexible energy generator, SSE, fits that framework because the centre of gravity in Britain’s energy markets, that began with building renewables, has shifted towards connecting them, while funding uncertainty created an attractive entry point. The fundamental shift in market structure in Britain makes electrical transmission assets essential to energy security and affordability, so it’s not just a story of stable regulation. The abundance of renewable generation that has been built in northern Britain needs to be efficiently connected with population and industrial centres further south. At the same time, ageing infrastructure needs to be refreshed, so the country is relying on this to be delivered.

The simple story: rebuild and rewire Britain
SSE’s transmission footprint in the north of Scotland places it at the centre of a fundamental shift in Britain’s electrical grid. As a result, SSE has one of Europe’s highest regulated-utility growth rates, with a £33 billion investment plan to 2030. In regulated networks, prudent investment expands the Regulated Asset Value (RAV) on which returns are earned. By 2030, management targets adjusted Earnings Per Share (EPS) of 225–250p (resulting in 8-10% growth per year) and expects a rising share of earnings to be covered by inflation protection mechanisms. The resulting investment case is unusual: a defensive utility with a visible, policy-backed growth runway, resulting in predictable earnings growth.

SSE has secured supply frameworks for the major projects, hiring has expanded materially, and five out of 11 major projects are already under construction. Scottish permitting timelines are improving and regulators are taking a strategic approach that provides visibility for investment.  SSE is well positioned to execute effectively.

More than networks
SSE also owns renewables and flexible generation -primarily gas and hydro power generation. Even though 80% of the investment plan is directed towards networks, the remaining 20% directed towards renewables and flexible generation provides good upside to the regulated earnings growth and creates optionality for investment.

Diversification can be valuable: periods of weak wind can be partly offset by higher flexible-generation earnings, while long-term contracted renewables provide growth. The data centre theme may offer additional upside. SSE’s thermal sites and network footprint could support data centre-adjacent development and higher utilisation of networks and power generation assets. This highlights the strategic value of land, grid connections and flexible power in a market where speed-to-power is increasingly scarce.

Milford’s preferred framing is to keep regulated networks at the heart of valuation, and treat project development as selective upside rather than the foundation of the thesis. SSE’s business mix and investment plan align well with that philosophy.

Why the market created an opportunity
SSE’s shares were pressured during 2025 by a concern that the investment programme would require new equity. Our view was that investors were focusing on dilution while under-appreciating the value created by accretive network investment. SSE subsequently raised £2 billion, removing a major funding overhang and allowing attention to return to the earnings trajectory. Before the funding question was resolved, investors could reasonably worry that repeated small equity raises would keep the valuation capped. The capital raise does not make funding risk disappear, but it improves visibility and supports a cleaner re-rating debate as the business re-weights to regulated networks as a larger percentage of the business.

Investment thesis
Our thesis is that SSE can compound value through RAV growing faster than the market has historically associated with a UK utility. The equity raise has reduced near-term funding uncertainty; regulation provides a clearer pathway for transmission investment; and management retains flexibility through asset recycling, partnerships, hybrids and selective disposals.

Risks remain and require attention
As with any investment there are risks that need to be monitored. The most important things we are watching:

  • Execution: A transmission buildout programme of this scale is exposed to consenting, labour, equipment, raw material and contractor inflation. Regulatory allowances may not perfectly absorb overruns. Long-term agreements with suppliers and the strategic approach to regulation provide some protection. In addition, large offshore wind projects can suffer availability, vessel, turbine and sequencing delays.
  • Regulation: The UK energy regulator Ofgem is well regarded and transparent, but small changes in allowed returns matter when applied to a rapidly growing RAV, so we remained focused on this topic.
  • Affordability and politics: High customer bills can produce policy intervention. We take some comfort in knowing that connecting renewables helps keep bills lower as it improves the amount of power that can get to market.
  • Funding discipline: The £2 billion raise improves the position but does not eliminate leverage, refinancing or future capital-recycling needs. Finance ability remains an important item to watch.

Bottom line
SSE is best understood as a high-growth, regulated electricity-network owner with additional renewable and flexible-generation optionality. As management converts the £33 billion plan into RAV and EPS growth without allowing costs, policy or funding to overwhelm returns, SSE can deliver the combination Milford seeks: essential infrastructure, structural growth and a credible path to long-term value creation.