Calm, sunny weather – and loss of another 320,000 customers – kicks £80 million dent in SSE Q1 profits

Turbine installation work on the Beatrice wind farm in the Moray Firth.
Turbine installation work on the Beatrice wind farm in the Moray Firth – which yesterday generated its first electricity

A ‘perfect storm’ of lack of wind, warm weather, higher wholesale prices and the loss of more than 300,000 customers have blown an £80 million hole in the first-quarter profits of one the Scottish ‘Big Six’ energy companies.

Pearth-based SSE said yesterday the lack of wind during its first quarter meant that output from its offshore and inland farms was 15% lower than planned.

It also said that unusually warm summer temperatures had reduced household demand for energy and added that during the three months to 30 June the high wholesale cost of gas had affected the business.

In addition, SSE said the amount of electricity generated from its hydro power stations was 20% lower than expected.

In a trading statement to investors, SSE said that all these factors meant its adjusted operating profit for the first three months of its financial year would be £80million lower and “this will potentially impact on its full-year results”.

SSE chief executive Alistair Phillips-Davies said: “All of this has resulted in a higher cost of energy, lower than expected output of electricity from renewable sources and lower volumes of energy being consumed.

Donald Brown, Head of Private Clients at Brewin Dolphin Edinburgh, said: “SSE has continued to lose customers in the face of competition from smaller energy suppliers, to the tune of 320,000 in the first quarter of 2018.

“However, the main news of the day actually came at the group’s AGM which waived through the proposed merger of its household energy supply division and the merger with rival, Npower.

“The move is expected to generate significant cost savings – a figure of £175 million has been suggested by SSE – with the new business, SSE Energy Services, able to use the SSE name for up to three years before a re-brand becomes mandatory.

“For SSE investors this could be good news, providing the hope of long-awaited cost savings to support cap-ex plans. Meanwhile, potential shareholders in the new retail business still await any financial detail, not to mention a possible Competition Authority review of the domestic supply market.”

Meanwhile on the electricity generation front, SSE’s Stronelairg onshore wind farm (228MW) – which will qualify for Renewables Obligation Certificate subsidies – remains on course for completion in 2019.

The 558-MW Beatrice offshore wind farm – which is 40% owned by SSE – now has all 84 turbine jacket support structures installed as well as two turbines.

And yesterday Beatrice – which is Scotland’s largest offshore wind farm – started generating power for the first time following the successful installation of the first 7MW turbine.

When completed, Beatrice will be capable of providing electricity for the equivalent of 450,000 homes.

20 Jul 2018

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