MARK WILLIAMSON

SCOTTISH Hydroelectric owner SSE looks set to book a sharp fall in first
half profits after losing more customers and suffering a slump in renewable
energy output due to the weather conditions.

However, the Perth-based energy giant said it still expects to achieve
growth over the full year and to deliver a real terms increase in the
dividend for the period.

In an update on trading since 1 April, SSE said it expected to achieve
underlying earnings per share in the six months to 30 September of at least
33p compared with 45.9p in the same period last year.

SSE highlighted developments which might raise questions about the
economics of the kind of renewable energy projects which it has invested
heavily in.

The company has interests in wind farms, hydroelectric schemes and biomass
generators. It is working on a range of big projects including the Beatrice
development in the Moray Firth and an extension to the Clyde wind farm in
Lanarkshire.

However, SSE said profits at the power generation arm are expected to be
impacted by the significantly lower output of electricity from renewable
sources in the first six months against the same period in the preceding year.

SSE did not elaborate but the drop in output essentially reflects the fact
there has been less wind and rain in the year to date than in the first
half of the last year.

Last summer was very windy and there was lots of rain in September.

In July SSE said total output from renewable sources was 1.51 terawatt
hours in the first three months against 2.2TWh last time.

Conversely, SSE recorded an increase in renewables output in the year to
March compared with the preceding period.

On its website SSE says: “The primary driver for this differential was the
weather: put simply there was more rainfall and windier conditions in
2015/16 across Great Britain than in 2014/15.”

Critics of renewable energy believe the fact output is dependent on weather
conditions means the UK should not rely too heavily on it as a power source.

SSE said it expects the fall in renewables output to be offset by
improvements in the economics of conventional thermal generation, following
a fall in wholesale gas prices.

The company said profits from its retail arm will be impacted by a fall in
customer numbers, without giving details.

In July it said the number of electricity and gas customer accounts in
Great Britain and Ireland fell from 8.21 million on 31 March 2016 to 8.16m
on 30 June.

The company has said it operates in a phenomenally competitive market, with
over 30 suppliers.

Finance director Gregor Alexander said the company was committed to
delivering good services for customers and fair returns for shareholders
and was satisfied with its first half performance.

SSE said it expects to achieve a return to growth in the full year to 31
March, with an adjusted EPS of at least 120 pence, against 119.5p last time.

The company added: “SSE also remains on course to meet its principal
financial objective for 2016/17, which is to deliver an increase in the
full-year dividend that will be at least equal to RPI (retail price)
inflation, and also continues to target dividend growth that at least keeps
pace with RPI in subsequent years.”

It paid a full year dividend of 89.4p per share last time.

The company has said the vote for the UK to leave the European Union could
lead to aspects of the financial, regulatory and political environment
becoming more uncertain in the years ahead but that it is in good shape to
face whatever challenges may emerge.

SSE reckons the Competition and Markets Authority report on the energy
market published in June proposed a substantial package of reforms that
will deliver meaningful improvements for the consumer.


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