SSE blames weather conditions and drop in customers for sharp fall in first-half profits
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 April 1, SSE said it expected to achieve underlying earnings per share in the six months to September 30 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 in which it has invested heavily.
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 last time.
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: “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 onit.
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 March 31 2016 to 8.16m on June 30.
The company has said it operates in a phenomenally competitive market, with more than 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 March 31, with an adjusted EPS of at least 120p, against 119.5p last time.
The company said it remains on course to deliver an increase in the full-year dividend that will be at least equal to RPI (retail price) inflation. It is targeting dividend growth that at least keeps pace with RPI in subsequent years. SSE paid a full-year dividend of 89.4p per share last time.