News Column

SSE On Track To Meet Earnings Guidance Despite Customer Losses

July 17, 2014

Tom McIvor

LONDON (Alliance News) - SSE PLC said in a statement prepared for its annual general meeting Thursday that its financial outlook for 2014/15 is unchanged, and it is on course to give out an increased full-year dividend that keeps up with inflation despite customer losses in its first quarter.

The major UK energy supplier is holding its AGM in Perth, Scotland on Thursday. It said that, in spite of challenging market conditions, it continues to expect that its adjusted earnings per share for 2014/15 will be around or slightly greater than the 123.4 pence achieved in the previous year.

The FTSE 100 company's adjusted earnings are calculated by excluding the charge for deferred tax, its interest on net pension liabilities and the impact of exceptional items and certain re-measurements.

"Our customers are benefiting from the longest-ever household energy price freeze in the Great Britain market and good progress is being made in our programme of investment to build, upgrade and maintain the electricity assets customers rely on," Chief Executive Alistair Phillips-Davies said in the statement.

"Although energy market conditions are challenging, we are on course to give shareholders a return on their investment through a dividend increase that at least keeps pace with inflation," he added.

The company said that in its first quarter ended June 30 its number of electricity and gas customers in Britain and Ireland fell to 9.0 million from 9.1 million the previous year due to very competitive market conditions.

It added that the level of average electricity consumption during the period by its household customers fell to 853 kilowatt hours from 920 kilowatt hours, and the level of average gas consumption by household customers was around 68 therms rather than 96 therms.

The company said that in its wholesale division, total electricity output from gas fired power stations was largely flat at 2,192 gigawatt hours, but electricity output from coal-fired power stations halved to 1,792 gigawatt hours from 3,569 gigawatt hours.

In addition, SSE's total electricity output from its renewable sources fell to 1,580 gigawatt hours from 1,756 gigawatt hours previously.

The company said its ongoing programme to streamline the business and save cash during difficult market conditions is well under way and on course, with operational efficiencies being secured and planned asset and business disposals making progress. It said disposals of assets such as its PFI streetlighting contracts and non-regulated gas pipelines should be completed in autumn.

In May, SSE said it hopes to freeze household energy prices in the UK beyond January 2016, or even cut prices if further costs can be taken out of energy.

Household energy prices have become a key issue for the company, as a increase in winter energy prices from the UK's major suppliers, including SSE, was met with a public and political backlash and led to an ongoing competition review by the UK's energy regulator Ofgem.

At the end of June, the UK energy market regulator Ofgem referred the UK energy market to the Competition and Markets Authority for a full investigation, asking it to investigate the barriers to competition inherent with the "Big Six" suppliers.

Ofgem's own recent assessment of the energy market, along with the Office of Fair Trading and the CMA, found that competition is not working for consumers in the UK, and that growing profits, coupled with price hikes, have intensified public distrust of suppliers.

The regulator said at the time that the CMA will begin its investigation immediately and is likely to publish final decisions by the end of 2015.

Ofgem added that it expects the CMA to look at the relationship between the supply business and generation arms of the six main suppliers, to study the barriers to entry and expansion for suppliers and the profitability of the "big six".

The Big Six energy firms are Centrica PLC owned British Gas, E.ON, EDF, Npower, ScottishPower and SSE PLC.

SSE shares were down 1.1% to 1,526.00 pence during early trading on Thursday.

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Source: Alliance News

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