26th Mar 2014 14:12
LONDON (Alliance News) - SSE PLC Wednesday announced a major asset-disposal plan, cost-cutting initiatives, and a freezing of UK household energy bills ahead of its full-year results next week.
The major UK energy supplier said that as part of a new value programme, which is focused on simplifying operations and securing more operational efficiencies for the company, it is now planning asset and business disposals that will secure proceeds and debt reduction estimated to total around GBP1 billion.
The company said it has started the disposal process, which is expected to take two years, with the disposal of SSE's portfolio of PFI street-lighting contracts already under way and a GBP500 million disposal of the company's onshore wind farms planned.
SSE also said as part of the value programme, it has identified further operational efficiencies that will result in annual savings in overheads of around GBP100 million by March 2016 but will result in a reduction of roughly 500 UK employees.
The firm said it still expects to employ over 20,000 people in Britain and Ireland at the end of 2014/15.
The company said its efficiency changes include savings from the closure of its Units 1 and 2 at its coal-fired power station at Ferrybridge, West Yorkshire, due to take place on Friday.
SSE also announced that it will freeze at current levels its household energy prices in the UK until at least January 2016, subject to no marked or sustained increase in wholesale prices and no new environmental, social or other policy costs.
Household energy prices have become a key issue for the company, as a recent increase in winter energy prices from the UK's major suppliers including SSE, was met was public and political backlash and led to an ongoing competition review by the UK's energy regulator Ofgem.
The moves reflects Labour's promise to bring in an energy price freeze until 2017 if elected to office in the 2015 general election.
"SSE have shown today that the big energy firms are able to cut their costs and profits, and be confident about their ability to weather potential uncertainty in the wholesale markets, to give bill payers long-term price security," UK Energy Secretary Ed Davey said in a statement. "Customers of the others will be asking whether their suppliers will do the same."
SSE also called on the government to remove energy taxes from bills and integrate them into general taxation to make sure tax "is paid for fairly in a way that is proportionate to people's income and protects the vulnerable," Chief Executive Alistair Phillips-Davies said in a statement.
UK regulators are expected to announce whether there should be a full investigation into the competitive practices of energy companies, while on Monday consumer group Which? and the Federation of Small Businesses said that nine out of 10 consumers think the UK's major energy firms need further probing.
The company said that due to its decision to freeze prices, its profit margins in Energy Supply in the next two years are expected to be lower than in the past.
SSE added that it is planning a legal separation of the businesses within its Retail and Wholesale segments, planned to be completed by March 2015, and said the conclusions of its review of offshore wind development has resulted in plans to narrow significantly the focus of its near-term development plans to no more than 375 megawatts of capacity at the Beatrice project, offshore Scotland.
As such, the company has decided not to proceed further with the development of two onshore wind farms, Dalnessie and the Fairburn Extension, because they are considered no longer financially viable.
SSE, which was formed in 1998 from the merger of Scottish Hydro-Electric and Southern Electric, added that it has already put in place arrangements to limit the affect on its operations and investments in the event of a 'Yes' vote in the upcoming referendum on Scottish independent.
The company also said that it expects financial results to be in line with its guidance statement issued in January, including a increase in adjusted profit before tax by around 9% to roughly GBP1.54 billion before charges for coupon payments associated with hybrid capital, which are presented with dividends and reflected within adjusted earnings per share.
SSE said on Wednesday that it expects adjusted earnings per share to increase between 2% and 4% in 2013/14, and for 2014/15 to be around or slightly greater than in 2013/14 but to be subject to greater risks in the following two years.
The company said that it plans an increase in its full-year upcoming dividend of around 3%, and it is targeting an increase in the full-year dividend for 2014/15 of at least RPI inflation, with annual increases thereafter of at least RPI inflation also being targeted.
SSE said it now forecasts capital and investment expenditure by the company of roughly GBP1.6 billion in 2014/15 and then an average of up to GBP1.3 billion across the three years to March 2018.
"We're setting out a positive agenda for customers, including our price freeze to 2016; we're making sure our own house is in order for the future by streamlining and simplifying our business; and we're making clear we wish to work with people to find more ways of taking costs out of energy bills," Phillips-Davies said. "In all of this, I hope that people will see a company like SSE not as part of the problem but as part of the solution."
The company plans to announce its full-year financial results on March 31.
SSE shares were up 2.6% to 1,537.00 pence, putting it in the top five FTSE 100 risers Wednesday.
By Tom McIvor; [email protected]; @TomMcIvor1
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