28th Jan 2016 12:44
LONDON (Alliance News) - SSE PLC on Thursday said adjusted earnings per share for its full financial year are expected to fall as it lost customers during 2015, but the power utility said its dividend remains safe and will continue to at least grow in line with retail price inflation.
SSE said its adjusted earnings per share for the financial year ending on March 31 will come in "at least" at 115.0 pence, which would be down from the 124.1p reported in the previous financial year.
Despite the expected fall, SSE said it still expects to report an increase in the full-year dividend for the current year that will at least be equal to RPI inflation, and the company confirmed it plans to continue to grow that dividend at least in line with RPI inflation in the years going forward.
SSE said it had 8.28 million customers in Britain and Ireland at the end of December, which is down from 8.58 million at the end of March 2015. However, the number of home services customer accounts increased by 14% to over 390,000.
Succumbing to wider market pressure and potentially in an attempt to win back customers, SSE said it plans to reduce household gas prices on its standard tariff in Great Britain by 5.3% on March 29 - three months before SSE's current price freeze is due to come to an end.
SSE is the first London-listed utility company to cut prices this winter, with E.ON the only other firm to announce cuts. However, both companies have cut gas prices and not electricity prices.
UK industry regulator Ofgem has accused energy companies in the country of over-charging customers as prices have failed to fall in line with significant drops in wholesale costs. Wholesale energy costs have fallen by around a third over the last 12 to 18 months, and make up nearly half of a domestic bill paid by customers.
"SSE customers have not seen an energy price increase since November 2013; indeed, the new gas prices will be 12%, or GBP78 lower for an average customer than 2013 levels. And a typical dual fuel direct debit bill on our standard tariff will be GBP1,068 compared with GBP1,162 in November 2013," the company said.
The entire electricity and gas market in the UK has been under pressure to cut retail prices following steep falls in wholesale prices. SSE highlighted that, following the price cut, wholesale energy prices will "account for an ever-smaller proportion of the bill" than before.
That reduction will save the average household on a standard tariff around GBP32 per year compared to existing prices, and the cut represents SSE's third reduction in two years.
Exacerbating the loss of customers was a 3% fall in average household electricity consumption in that nine-month period to 2,618 kilowatt hours from 2,700 kilowatt hours, whilst gas consumption remained broadly flat year-on-year at 240.0 therms.
Total gas output in the nine-month period to the end of 2015 experienced a small drop to 290.0 million therms from 296.0 million therms, whilst total electricity output from renewable sources rose considerably, with output from gas and coal powered stations falling.
Electricity output from renewable sources rose to 6.8 terrawatt hours from only 5.6 terrawatt hours whilst output from gas-fired power stations fell to 6.6 terrawatt hours from 7.5 terrawatt hours. Output from coal-fired stations decreased to 3.7 terrawatt hours from 5.1 terrawatt hours.
That means SSE produced more electricity from renewable sources in that period compared to its gas and coal plants. SSE's hydro-powered assets in Scotland benefited from increased rainfall in the period and the company continued to invest in renewable energy during the period.
The Strathy North onshore wind farm in Scotland came fully online in November to increase the company's onshore capacity to 1,619 megawatt hours. That project will qualify under the recently closed Renewables Obligation subsididy, however the company warned its future onshore wind projects will affect its remaining onshore wind development pipeline.
"Following the pragmatic approach taken by the UK Government to grace periods, SSE expects to construct around 400 megawatts of onshore renewable energy under the Renewables Obligation, subject to the Parliamentary passage of the legislation," said SSE.
The company said its Stronelairg and Strathy South wind farms continue to face "significant uncertainties" due to their development schedules. A court quashed the consent decision for Stronelairg in December, which SSE is appealing alongside the Scottish government whilst Strathy South does not have a final planning decision as it has been going through a public inquiry process and therefore may not qualify for the Renewable Obligation grace periods.
Returning to its gas division, SSE said the deal signed back in July last year to acquire a 20% interest in the Greater Laggan Area offshore the Shetland Islands and the associated gas plant will help meet its gas demand requirements, create value over the long term despite short term headwinds and represent SSE's focus on maintaining a balanced range of energy businesses across the portfolio.
"Work is progressing well at the Shetland Gas Plant in readiness for start-up and a major milestone was reached on the 31st December when the vent flare was lit. The aim is to have the subsea wells open, and start gas export and sales in the coming weeks," said SSE.
SSE said it expects gross capital investment and expenditure will total around GBP1.65 billion for the full year, and said it spent around half of that amount in the first nine months of the year.
The company's wholesale division spent GBP200.0 million on new onshore wind farms and almost GBP30.0 million in exploration and production in the first nine months whilst the network division spent over GBP400.0 million investing in its transmission system. The retail segment invested over GBP100.0 million in energy supply and related services, including work associated with the roll-out of smart meters and improving digital services for customers.
SSE has installed a total of 135,000 smart meters in customers homes as of the end of 2015.
SSE is also continuing to offload non core assets to rid itself of financial burdens and to release capital for future investments. The disposal of assets is taken into account in SSE's total expected net capital and investment expenditure of GBP5.50 billion across the four years to March 2018.
Proceeds and debt reduction from these planned and completed disposals are expected to result in a financial benefit in excess of GBP1.00 billion and, to date, disposals with a total value of around GBP650.0 million have been completed or agreed, it said.
"SSE remains a resilient and diverse business, with a strong commitment to operational efficiency and delivering value for customers and investors. It remains firmly focussed on delivering this year's financial objectives and making sure that the business is fully prepared for the future," said Chief Executive Alistair Phillips-Davies.
SSE shares were trading down 0.6% to 1,424.0 pence per share on Thursday.
By Joshua Warner; [email protected]; @JoshAlliance
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