A one-time hit to cash flow is a drop in the ocean compared with many years of earnings growth
Thursday 26 May 2022 Author: Martin Gamble

SSE (SSE) £17.29

Gain to date: 11.8%

Original entry point: Buy at £15.46 on 3 June 2021

Energy sector shares came under pressure (24 May) after the Financial Times reported the UK chancellor Rishi Sunak had ordered plans to be drawn up to impose a windfall tax on up to £10 billion of excess profits earned by electricity generators including operators of wind farms.

This notably goes further than speculation of a levy on oil and gas producers.

SSE shares tumbled 10%, Drax (DRX) fell 15% and Centrica (CNA) dropped 10%.

Numis says: ‘We note that these are currently only press reports and the article makes clear that Downing Street and the Treasury has yet to make a decision with regard to any windfall tax, or how this may apply and to whom.’

Countries like France and Spain have taken a different approach and provided direct help to households by limiting the rise in energy bills.

From an investor perspective continued investment in renewables and power generation infrastructure is needed to meet the UK Government’s net zero targets.

SHARES SAYS: SSE has a major role to play in the UK’s energy future and investors shouldn’t get distracted by the short-term impact of a windfall tax. Remains a buy.

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