SSE chief in warning
Brexit vote and competitive market present challenge for big energy players
SSE has warned that the Brexit vote will lead to greater financial, regulatory and political uncertainties and that it continues to lose customers in a highly competitive retail market.
But at its annual meeting in Perth, new chairman Richard Gillingwater assured shareholders that despite investment setbacks it would continue to deliver inflation-linked dividend growth from the most diverse portfolio of energy assets in the UK.
Mr Gillingwater, who has stepped up from senior independent director to succeed Lord Smith of Kelvin, told the meeting: “The result of the EU referendum and what it means for the UK is clearly a key issue for every large company operating across these islands, the full impact will only become clearer in the months and years ahead, and during that time we will be making a positive case for harmonisation of energy markets across EU member states and non-EU countries.
“In any event we believe SSE’s purpose and strategy give it an underlying resilience that stands the business in good stead, whatever the political weather.”
In a trading statement yesterday, chief executive Alistair Phillips-Davies said the group had made “a solid start to the financial year with continued focus on operational efficiency” and significant progress on the Beatrice Offshore Wind Farm and the £1.2 billion Caithness Moray electricity transmission link – SSE’s largest-ever construction project.
He said: “The outcome of the UK’s referendum on membership of the EU could lead to aspects of the financial, regulatory and political environment becoming more uncertain in the years ahead.”
Answering shareholder questions on frustrated investments, Mr Phillips Davies said SSE would consider its options following a court victory this week for conservationists opposing the Seagreen wind farm project, said to be worth £1.2bn to the Scottish economy. On the company’s two aborted carbon capture storage ventures, with BP and Shell respectively, the chief executive said he hoped it might be “third time lucky in the future”.
The chairman said the study by the Competition and Markets Authority, published on the day after the EU referendum and widely criticised by small suppliers and consumer groups, was a “substantial package of reforms which will deliver meaningful improvements for the consumer”.
The CMA investigation was prompted in 2014 by claims of profiteering by the “big six” energy companies, since when the number of small suppliers in the market has almost doubled. Questioned by a shareholder on SSE’s continuing loss of customers, because of growing awareness of more competitive prices from smaller companies, Mr Gillingwater said: “It’s a phenomenally competitive market we are in. We have over 30 suppliers all battling for customers, we believe we provide a very price-competitive and high-quality service that allows us to retain one of the largest customer bases in the industry.”
The chairman told Mark Crossman, representing a range of charitable and pension fund investors, that SSE had cut the carbon intensity of its generation assets by over a third since 2006, and by 16 per cent last year.
He said the group’s North of Scotland hydro assets “remain core to our business” and a £4 million investment would see a visitor centre at the Pitlochry dam opened before the end of 2016.
Shareholder and environmental scientist Dr Tom Leatherland asked: “In this current political climate, is it still justifiable to make substantial expenditures on potential new renewable energy projects, many of which may have to be written off, and if you are looking increasingly at gas generation, how are you going to get this balance?”
Mr Gillingwater said: “We have the most diverse and most balanced energy business of all the UK players.
“Things that were in favour can fall slightly out of favour and we want to be as well positioned as we can be to make sure we have the right options on the table – the only option we don’t have on the table is nuclear.”
Mr Phillips-Davies said: “Despite the Seagreen decision we still have other opportunities to build offshore wind capacity, we have a development portfolio of 800MW of onshore wind, and four projects we could potentially put in for gas-fired generation.”
‘‘ We want to be as well positioned as we can be to make sure we have the right options on the table