If you had the sense an equity raise was already baked into SSE PLC's (LSE:SSE) share price, you were not alone.
After months of debate about the strength of its balance sheet and a helpful rally in the shares, the company has finally confirmed a £2 billion equity issue alongside its half-year update.
Citi expects this set the tone for trading in the shares, which rose over 16% yesterday, more than the results themselves.
The raise is designed to underpin an ambitious capital investment plan, with SSE intending to spend £33 billion over the coming five years, with about four-fifths earmarked for its electricity networks business.
These are the regulated power lines and substations that will need heavy expansion and reinforcement as the electrification of the UK is ramped up. The remainder goes to renewables and thermal generation, keeping SSE’s development pipeline moving.
Management also plans to recycle around £2 billion through disposals, although it is not yet clear whether its stake in electricity distributor SSEN Distribution is on the table. How those asset sales unfold will matter for leverage.
The group is aiming to keep net debt to earnings before interest, tax, depreciation and amortisation below 4.5 times across the plan.
On earnings, SSE has set a target of 225p to 250p per share for 2029/30, a range that brackets the current consensus of 234p.
Citi thinks this, combined with the refreshed balance sheet, should give investors some comfort that the investment programme can be delivered without undue financial strain.
The broker keeps its 'neutral' stance and £17.30 target price but says the pieces are largely in place for the shares to hold their ground.