Exodus of 300,000 energy switchers helps push SSE profits down by 3.3%

Profits at Perth-based utility giant SSE slipped by 3.3% to £1.5 billion in the year ending March 2016 in a ‘challenging’ year for the business with lower gas prices, mild weather and a new regulatory price control marking a reduction in profits in all three of its business divisions.

• Its Wholesale operating profit of £442.5 million was down 6.6% due to lower wholesale gas prices and challenging operating conditions affecting its production and storage businesses
• Its Networks operating profit was down 1.1% to £926.6 million as part of its new regulatory price control
• And Retail operating profit was down 0.4% to £455.2 million with profit in household energy supply falling due to milder weather and the flight of more than 300,000 customers to lower-price rival providers.

Alistair Phillips-Davies, Chief Executive, said: “Although it’s been a challenging year, the political and regulatory climate is beginning to become clearer.

“Consequently, we plan to invest around up to £6 billion over the next four years to March 2020 to support much-needed transformation of the UK’s electricity and gas infrastructure.”

SSE will also develop its plans for potential new gas power stations at Keadby in Lincolnshire and Seabank 3 near Bristol following planned reforms to the electricity generation Capacity Market. 

Last year, SSE’s total capital and investment spend was £1.6 billion, which included its largest ever capital project developing the Caithness-Moray electricity transmission link.  It has expanded its renewables portfolio with 67 MW of new onshore wind commissioned this year and a further 548 MW in construction, including the Galway Wind Park, Ireland’s largest wind farm.

It also purchased a 20% interest in the new Shetland Gas Plant and four Greater Laggan gas fields along with surrounding exploration acreage off the Shetland Islands to provide long term gas assets to maintain the balance of the business.   

In January 2016, SSE cut its prices by 5.3% – its third gas price cut in two years, meaning costs for the average customer are now 12% or £78 lower than in 2013. 

The company is also pondering a sale of part of its 50%-stake in SGN – the gas distribution business.