SCOTTISH energy giant SSE has come under-attack from an activist investor which is pressing for a dramatic shake-up at the group.

Elliott Investors is calling for a break up of Perth-based SSE and wants two new directors to be appointed to the board to beef up corporate governance.

The call for change was made in a letter to SSE’s chairman, Sir John Manzoni, in which Elliott makes a stinging attack on the performance of the group under chief executive Alistair Phillips-Davies.

The letter accuses SSE of depriving shareholders of £5 billion value by maintaining an “inefficient” conglomerate structure, which combines renewable energy generation assets and networks businesses that Elliott reckons do not belong together.

It says this has made it harder for SSE to realise the potential of businesses that operate in attractive industries amid the energy transition while reducing the appeal of the group to investors, with disastrous implications for the company’s share price.

SSE has developed an extensive windfarm portfolio, including huge developments off the UK, under a pivot to renewable energy initiated by Mr Phillips-Davies and operates transmission networks in the UK.

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Elliot claimed: “The market’s failure to ascribe fair value to SSE and its portfolio is directly attributable to the Company’s inefficient conglomerate structure and confusing equity story. “Renewables and Networks are intrinsically different businesses, supported by divergent shareholder registers, with individual funding needs, growth profiles and strategic priorities.”

In the letter, Elliott said despite a backdrop of favourable industry trends and a top-tier portfolio, SSE continues to disappoint those who depend on its success.

It added: “SSE shareholders today receive only a fraction of the value of SSE’s businesses, and its persistent stock-price underperformance has been a problem that management has failed to address.”

Elliott is also highly critical of the defence of its strategy issued by SSE last month following reports that the investment firm was pressing for a break up.

SSE proposed to sell a 25 per cent stake in its networks business in a response that Elliott said yesterday lacked ambition in quantum and timing and which it claimed followed an opaque and deeply flawed review process.

HeraldScotland: SSE chief executive Alistair Phillips-Davies Picture: SSESSE chief executive Alistair Phillips-Davies Picture: SSE

However, Mr Philipps-Davies yesterday defended the group’s strategy and the review process.

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Mr Phillips-Davies said the Net Zero Acceleration Programme announced on November 17 represented the optimal pathway to accelerate clean growth, lead the energy transition and create value for all stakeholders.

He added: “Separation risks valuable growth options across the clean energy value chain, would jeopardise our ability to finance and deliver the major infrastructure the UK needs to create jobs and achieve net zero, and would lose shared skills that benefit the group.

“Separation does not support the financing of our core growth businesses and would rule out adjacent growth options, as well as reducing the resilience of the business model.”

Mr Phillips-Davies said the launch of the programme had followed a rigorous process involving constructive engagement with shareholders, and consideration of independent advice. He said SSE has continued to have constructive and supportive discussions with major shareholders and stakeholders about the plan.

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Elliott made a copy of the letter to Sir John widely available in what looks like an attempt to turn up the pressure on the SSE board after lobbying privately for change.

The firm, which manages $48bn funds, describes itself as a top five investor in SSE.

In the letter it said: “During our dialogue these past several months, we have shared with you our view that SSE owns one of the most attractive portfolios of Renewables and Networks assets. Yet SSE shareholders today receive only a fraction of the value of SSE’s businesses, which we believe are worth £21 per share (representing a ~30% upside to the current share price, or a £5 billion increase to the current market capitalisation).”

Elliott added: “The addition of two new independent directors with renewables expertise would better position the Company to address the gaps in its announced strategy, including the exploration of additional pathways to value creation.”

It suggested these could include a more ambitious disposal of Networks and a partial listing or partial disposal of Renewables.

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In the strategic update issued in November SSE said a standalone renewables business would find it harder to raise funding for large projects than as part of the group.

Its claims that a break-up would result in £95m annual dis-synergies and £200m one-off separation costs were disputed by Elliott yesterday.

SSE said in November that it would rebase its dividend to 60p per share following completion of the existing five year plan in 2023, which it expects to be worth at least £3.50 per share over that period. Elliott said the rebasing represented a 30 per cent dividend cut.