More customers desert SSE in quarter to end of June
THE UK’S second largest energy supplier has warned investors that the industry faces “complex challenges” over the rest of the year as its customer base continues to erode.
SSE, once known as Scottish and Southern Electric, lost 230,000 customers in three months to the end of June as competition within the energy retail market ratcheted higher with the influx of new independent players.
SSE also faces a political hit later this year as the regulator prepares to cap bills for the market’s most vulnerable customers.
In addition to a 3pc drop in customer numbers to 7.77m, SSE was hit by lower energy consumption due to milder than expected spring temperatures.
Alistair Phillips-davies, SSE’S chief executive, said in a trading statement that the current financial year was presenting a number of complex challenges. “SSE is a focused, resilient and adaptable business with efficient operations and disciplined investment at its core,” he said.
“There continues to be significant change across the energy sector, but also opportunities for responsibly minded businesses to contribute positively to its direction in the interests of customers and investors alike.”
Jon Musk, an analyst at RBC Capital, said despite the cautious tone, investors were unlikely to baulk at the update because its guidance on spending and dividend cover was unchanged. The group’s shares edged up 0.4pc to £14.77 yesterday.
SSE said it was still on track to hold its dividend cover within its target range of around 1.2 to 1.4 times, but warned that it would be towards the lower end of the range this year. This means earnings per share are likely to be lower this year than in 2016/17, but in line with its full-year outlook.
The generator and network operator is standing by its plans to invest £6bn over four years to March 2020 to increase its renewable energy portfolio, and £9bn in its networks business.
A larger renewables portfolio should help to offset its weaker retail earnings. SSE had 761MW of new onshore wind farms under construction at the start of the year and six out of seven wind farms should be completed this year. On top of this the 588MW Beatrice offshore wind farm is expected to be fully operational in 2019.
Scottish Power’s earnings are also increasingly reliant on renewable energy generation. The supplier’s core profits, or earnings before interest, tax, depreciation and amortisation, for generation and supply plummeted by 76pc to £48.8m in large part due to the shutdown of its Longannet coal-fired power plant. In addition, the mild weather dragged domestic power sales down by around 7pc and domestic gas sales down by around 8pc.
By contrast earnings from the Scottish Power Renewables arm climbed by a third to £153.7m, driven by a 43pc increase in onshore wind power.
British Gas, Britain’s largest energy supplier, owned by Centrica, has paid a total of £1.1m to 12,000 customers in compensation for missed or delayed appointments. The energy regulator Ofgem said that the company paid £90 to each affected customer, who were mainly business energy users.