Perth-based energy giant SSE plc warned that its profits for this year will be disappointing and blamed the warm weather plus fierce competition. During the six-month period to September, its customers consumed 23% less gas, while turbine output declined because of low winds, the company added.
SSE plc (formerly Scottish and Southern Energy plc) said that since June it has lost another 100,000 customers, which brings the total in the past year to over half-a-million. Despite the recent decline in wholesale costs, the company says it will not reduce prices.
Considerably smaller losses in its energy supply arm, plus greater profits from its regulated networks business helped the company post adjusted profits for the six-month period of £370.3 million, a 4.6% increase compared to the same period last year.
SSE’s chairman Lord Smith of Kelvin warned that he expects full-year earnings per share to be at the lower end of the range predicted in March 2014, i.e. about the same as last year and not marginally higher. He said this was due to “the cumulative impact of a challenging business environment and persistently low production and consumption of energy”.
CEO Alistair Phillips-Davies said:
“In tough market conditions we have been able to deliver solid business results at the same time as being a responsible company that does the right thing by its employees and its customers.”
“Successful energy companies are needed to invest in the UK and Ireland and we are contributing around £9 billion a year to the wider UK economy, but we think it’s also important to take a stand on issues for our customers and employees by committing to things like the Living Wage, the Fair Tax Mark and our own price freeze.”
Temperatures had been 1.3C warmer than the historical average in five of the six months to September. The UK’s second-largest energy company added that October’s temperature was 1.6C higher than usual, and November is likely to be similar.
SSE’s energy supply unit posted a £16.9 million loss, despite charging customers more this year compared to last year and enjoying considerably lower wholesale prices. Last year’s loss, however, was £115.4 million.
Price discounts dismissed
Even though natural gas prices have reached a 4-year low, the company refuses to consider lowering its prices for consumers. In 2013, it said it would freeze all prices until 2016.
Wind power output declined by 22% during the six-month period ending in September. SSE said it was due to lower-than-expected wind speeds, even though it has more wind farms this year.
After 13 years as chairman, Lord Kelvin Smith will stand down in early 2016. He will be succeeded by senior independent director Richard Gillingwater, who is now deputy chairman.
The UK’s competition watchdog, the Competition and Markets Authority, is investigating the country’s whole energy supply market closely. Most analysts expect it to force the eventual breakup of the country’s biggest energy producers. Hence, SSE’s cautious tone is not surprising.
Lawmakers have criticized British energy suppliers for increasing prices and squeezing consumer’s pockets.