The Courier & Advertiser (Perth and Perthshire Edition)
Power firm SSE warns of squeeze on dividend
ENERGY: Market challenges likely to push payout to lower end of cover range in 2017-18
Shares in Perth-headquartered power provider SSE moved lower in early trading as it warned of “additional challenges” that could hit shareholder payouts in the coming financial year.
The group, one of the UK’s Big Six energy suppliers, said it expected to increase the full-year dividend for the current financial year to March 31 to the top end of the cover range as set out last May.
However, the group warned it expected the annual dividend for the forthcoming 2017-18 financial year to be towards the bottom of the stated dividend cover spectrum.
SSE said it expected operating profit from its networks unit to be around £100 million lower next year than this on a like-for-like basis, and “this and other challenges” – including a lowerthan-expected clearing price for electricity provision in the 2017 Capacity Market Year-Ahead Auction – had resulted in the lower 2017-18 dividend projection.
“We can expect additional challenges in the new financial year, but we are committed to delivering annual dividend growth that at least keeps pace with inflation, and to working towards ensuring that dividend cover remains within the expected range, albeit towards the bottom of it, “group finance director Gregor Alexander said.
“SSE is a resilient business and we will continue to focus on securing maximum value from our portfolio of wholesale assets, achieving further efficiencies and customer service improvements in our networks businesses, responding positively to competition in our retail markets and creating long-term value through investment of around £1.7 billion in 2017-18.”
In the current financial year, SSE said all three of its operating units – wholesale, networks and retail – were expected to report full-year profits.
Despite lower renewable energy output, the group said operating profits within its wholesale division were likely to be higher than in 2015-16 as a result of improved performance in energy portfolio management, thermal generation and gas production.
The networks business is on course to deliver a similar result to the prior year, with higher returns from electricity distribution offset by expected reductions in the contribution from electricity transmission and SGN, which was the subject of a partial equity disposal during the year.
SSE said operating profits from its retail arm were likely to be “slightly lower” than prior year levels.
Capital expenditure by the group in the current financial year is expected to come in at £1.7bn – a spend that will be maintained in the coming 12 months – and it will close the year with net debt and hybrid capital of £8.6bn, down from £9bn a year ago.
Mr Alexander said: “The operating environment has presented SSE with a number of complex issues to manage, but in this financial year we have been able to offset the impact of disappointing renewable energy output caused by drier and less windy weather conditions, and we are on course to deliver adjusted earnings per share of between 122 pence and 125 pence.
“We are also on course to deliver a full-year dividend increase that at least keeps pace with RPI inflation.”
Shares in SSE closed down 23.13p at 1,464.87 yesterday.