SSE PLC (LSE:SSE) has been given clarity around UK windfall taxes by the autumn statement yesterday, but Citigroup reiterated a ‘neutral’ view on the shares as it views returns on offshore wind projects "increasingly questionable".
The second mini-budget of the autumn provided “the clearing event that we had looked for”, analysts said.
Near-term growth in renewables being pursued by the company “remains intact”, they added, with network disposals expected to deliver a “decent premium” to the FTSE 100-listed company’s regulated asset base.
But the Citi forecasts said “it remains unclear the scale of value creation from renewable investments, given the higher capex and also higher cost of capital”.
This was seen against a “context of increasingly questionable return spreads in offshore wind projects globally”.
With dividend yield of around 3.5% in the 2023/24 financial years and Citi expecting earnings to be flat, there was “limited appeal” in the shares in the context of a higher rate environment.
However, the 12-month price target was lifted to 1,664p from 1,486p.
Elsewhere, JPMorgan has a more positive view on SSE's shares, saying investors now "have enough visibility on earnings to turn more positive"ok" and that there could be earnings upgrades for it, Centrica and Drax.