SSE burned by the heatwave

Sunshine knocks £1bn off utility giant’s value

MORE than £1billion was wiped off energy giant SSE’s value yesterday after it warned this year’s heatwave will hammer profits. Shares in the industry heavyweight dived 8% to a five-year low as bosses hiked the cost of the weather and high wholesale prices on the business. And SSE also warned the Government’s proposed price cap on rip-off standard variable tariffs would lead to “significantly lower” fullyear profits in its supply arm. The company said in July that “relatively dry, still and warm weather”, together with “persistently high gas prices”, had cost it £80million in the first three months of its financial year. In a trading update yesterday it increased that figure for the first five months to £190m and warned its half-year profits would halve.

SSE’s arm that supplies gas and electricity to homes will be the worst affected, with the firm saying it would make a loss.

The company also said its full-year profits would be hit harder than its rivals by the planned price cap because it had only increased standard variable tariffs once this year, by an average of 6.7% in July.

Chief executive Alistair Phillips-Davies said: “Lower than expected output of renewable energy and higher than expected gas prices mean that SSE’s financial performance in the first five months has been disappointing and regrettable.”

The news also hit shares in National Grid and British Gas owner Centrica, which fell 0.6% and 3.6% respectively.

SSE is currently ploughing ahead with a planned merger of its supply arm with those of its rival npower.

Russ Mould, investment director at City firm AJ Bell, said: “It is rare to see a profit warning from a utility as they are meant to have predictable income streams. Yet SSE bucks the trend because of the wrong type of weather.”