The Courier & Advertiser (Perth and Perthshire Edition)
Profits surge 38% for Scottish energy giant
SSE INSISTED its energy trading is legitimate as it posted half-year profits of £397.5 million in a “challenging market”.
The figure was more than 38% up on the £287.4m interim figure this time last year, but the Perth energy giant said the performance was a return to the level seen in 2010, when profits in the first six months reached £385.5m.
The scale of profits, following price rises of an average 9% imposed a matter of weeks ago, came into question (see below).
SSE’s statement for the six months to the end of September came a matter of hours after allegations of price-fixing in wholesale markets hit the headlines.
Whistleblowers claimed to have witnessed irregular trading patterns, leading regulators to launch probes and Energy Secretary Ed Davey to tell the House of Commons anyone abusing markets would face the “full force of the law”.
The big six energy firms have denied wrongdoing, and yesterday SSE said it was “still entirely confident its wholesale energy market activity is fair and legitimate”.
Company chairman Lord Smith of Kelvin said full-year results would provide a more settled picture of SSE performance.
He said retail margins were low and a small percentage of overall performance.
“SSE’s focus is always on full-year results because the potential for volatility is always much greater in a half-year period, but it is obviously encouraging that adjusted profit before tax in the first six months has been restored to a level around that achieved in 2010,” he said.
“This does not hide the fact, however, that energy market conditions remain challenging. The prices achieved for generating electricity have been weak, and higher gas and non-energy costs unfortunately had to be reflected in the increase in household energy prices which SSE implemented last month.
“The energy supply business accounted for 8.1% of SSE’s adjusted operating profit in the period and its profit margin was 1.5%.”
SSE said only £75.7m of the headline prof its f igure came from its retail operations, following a £101m loss in the division last year, and that it had capped British household prices until the second half of next year “at the earliest”.
It also said the number of energy accounts it held had risen by 50,000 since March, while average household gas consumption rose 27.9% and electricity consumption rose 2.8%.
Rising bills were blamed on higher prices in the wholesale market and the cost of using electricity networks to distribute electricity and gas. In particular, the firm highlighted the £1.1 billion cost of renewing the Scottish transmission network.
The cost of environmental and social initiatives was also a factor, SSE added, and was expected to continue to impact on costs in the years to come and as use of energy declines on an underlying basis.
SSE highlighted what it called “a new level of market transparency” in the way it had run its wholesale operations since the introduction of a new policy in October last year, and revealed that it had a total of 3.2GW of renewable energy capacity — including 1.1GW in hydro power, 1.4GW in onshore wind and 256MW in offshore turbines — as part of a total UK and Ireland capacity of 12GW.
The company also cautioned that the economic outlook for the UK and Ireland continued to be uncertain, highlighting “particular uncertainty” about the electricity generation market.