Big Six energy company SSE has entered into an agreement to sell its contracting division to the Aurelius Group for £27.5 million.
It forms part of SSE’s strategy to focus on its core networks and renewable energy businesses, for which it has a £2 billion disposals programme designed to support the strategic shift.
SSE Contracting provides mechanical, electrical and street lighting services, and is the largest street light contractor in the UK while its raid division delivers mechanical, electrical and civil services to companies such as Transport for London and Network Rail .
Gregor Alexander, SSE’s finance director, said the change in ownership should provide a “good home” for the contracting business, given Aurelius’s proven track record.
“It leaves the SSE group more focused around its renewables and networks core, allowing the Contracting business to thrive in an environment better suited to its ambitions.”
The sale is expected to be completed by the end of June 2021, subject to a number of conditions such as Irish Competition and Consumer Protection Commission filing and clearance.
Around 1,900 Contracting employees will work under the new ownership from this summer. To ensure a smooth transition, SSE will continue to provide certain services under a Transitional Services Agreement for a period post completion of the sale. This will include a phased and carefully managed migration, and as such there will be no immediate impact on customers.
The £27.5 million consideration comprises £17.5 million upfront, a £5 million loan note issued by Aurelius on completion that is repayable by 2026 with a fixed PIK interest rate of 6% and up to £5 million in earn out based on Financial Year 2021/22 EBITDA performance.
Tristan Nagler, UK managing director of Aurelius, added that, as seller before had, “SSE recognised Aurelius to be the partner of choice to execute the divestment of a promising business unit, establishing SSE Contracting as a standalone business so it can fully take advantage of new growth opportunities".
SSE has sold its Multifuel assets and its gas exploration and production assets over the past year to help it reposition itself to further focus on net zero. This "strong strategic footing" remains a key focus for the company despite a £200 million impact over COVID-19 that the company detailed in its full year results for 2020.
Already in 2021, it has continued to target its core areas of growth, with its networks arm issuing its second green bond, a £500 million seven and 15-year dual tranche Eurobond.