TIDMSSE
RNS Number : 0651D
SSE PLC
26 January 2015
SSE plc
TRADING STATEMENT
SSE plc completed the third quarter of its financial year on 31
December 2014.
This trading statement:
-- includes information about SSE's operational and investment
activities for the nine months to 31 December 2014;
-- confirms SSE's expected financial results for the year to 31
March 2015, which are forecast to be in line with the financial
outlook given in the interim results statement;
-- confirms that SSE still expects to report an increase in the
full-year dividend for 2014/15 that will at least be equal to RPI
inflation;
-- confirms that SSE is targeting an increase in the full-year
dividend for 2015/16 of at least RPI inflation, with annual
increases thereafter of at least RPI inflation also being
targeted;
-- details key developments since SSE published its interim results on 12 November;
-- announces that SSE will reduce household gas prices in Great
Britain by 4.1% on 30 April and then extend its household gas and
electricity price guarantee to at least July 2016; and
-- includes an update on SSE's value programme of operational efficiency and asset disposals.
Alistair Phillips-Davies, Chief Executive of SSE, said:
"Customers are at the heart of SSE's business, and our work to
secure their energy supplies in wholesale markets last spring
enabled us to guarantee that prices would not increase until at
least January 2016, showing we are committed to treating all of our
customers fairly and to giving them stable prices over the
long-term. We're being true to that commitment with a 4.1%
reduction in the typical gas bill and an extended guarantee meaning
gas and electricity prices won't go up before July 2016 at the
earliest.
"The challenging business environment we identified at the start
of this financial year is likely to continue into the new financial
year and we believe that addressing the resulting issues directly
is the right thing to do for customers and the best way of
safeguarding the interests of investors. That is why, at the same
time as reducing tariffs for customers, we're continuing to make
sure our own house is in order for the future, with a clear focus
on our value programme to make sure SSE is well-positioned for the
long term."
Operations in the nine months to 31 December 2014
In the nine months to 31 December 2014 (comparisons with the
same nine months in 2013, unless otherwise stated):
-- SSE's Total Recordable Injury Rate was 0.12 per 100,000 hours
worked, compared with 0.12 during 2013/14 as a whole;
-- Wholesale: total electricity output(1) from gas-fired power
stations was7.5TWh, compared with 7.6TWh; from coal-fired power
stations output was 5.1TWh, compared with 11.3TWh;
-- Wholesale: total electricity output(1) from renewable sources
(conventional and pumped storage hydro electric schemes, onshore
and offshore wind farms and dedicated biomass plant) was 5.6TWh,
compared with 6.1TWh;
-- Wholesale:total output from gas production assets was 296
million therms, compared with 300 million therms;
-- Networks: the number of Customer Minutes Lost(2) in the
Scottish Hydro Electric Power Distribution area was 50, compared
with 57; in the Southern Electric Power Distribution area it was
43, compared with 47;
-- Networks: the number of Customer Interruptions (power cuts)
per 100 customers in the Scottish Hydro Electric Power Distribution
area was 53, compared with 59; in the Southern Electric Power
Distribution area, it was 46, compared with 51;
-- Retail: SSE's number of electricity and gas customer accounts
in markets in Great Britain and Ireland fell from 9.10 million on
31 March 2014 to 8.71 million;
-- Retail: the prolonged period of mild weather to 31 December
2014 means that average consumption of electricity by SSE's
household customers in Great Britain is estimated to have fallen by
5.6% from 2,860kWh to 2,700kWh; average consumption of gas by SSE's
household customers in Great Britain is estimated to have fallen by
15.8% from 285 therms to 240 therms;
(1) Output from electricity generating plant in which SSE has an
ownership interest (output based on SSE's contractual share).
(2) Excludes exceptional events
Investment in the nine months to 31 December 2014
SSE expects that its capital and investment expenditure will
total around GBP1.55bn (gross) in 2014/15 and total around GBP5.5bn
(net of disposals) over the four years to March 2018. In the nine
months since 1 April 2014:
-- Wholesale: SSE's CCGT development at Great Island in the
South-East of Ireland is on course to be fully commissioned this
Spring, with capacity to export 431MW on to the electricity
network;
-- Wholesale: Multifuel Energy Ltd, the 50:50 joint venture
between SSE and Wheelabrator Technologies Inc, continues to make
good progress in constructing the GBP300m, 68MW multi-fuel
generation facility adjacent to SSE's Ferrybridge power station,
with 'first fire' expected to take place in the next few weeks and
commissioning anticipated to be completed in the autumn;
-- Wholesale: SSE invested around GBP140m in onshore renewable
sources of energy and now has just under 300MW of new onshore wind
farm capacity in construction;
-- Networks: SSE's subsidiary Scottish Hydro Electric
Transmission has undertaken capital works totalling around GBP330m
to improve and increase the capacity of its network, including work
on SSE's section of the Beauly-Denny line which now has all towers
installed with two of the three sections of the new line energised;
and
-- Retail: SSE has invested around GBP75m in energy supply and
related services, including work associated with the roll-out of
smart meters and improving digital services for customers.
SSE estimates that its adjusted net debt and hybrid capital will
total around GBP7.8bn on 31 March 2015, compared with GBP7.64bn on
the same date in 2014.
Financial outlook
SSE will publish its results for the financial year to 31 March
2015 on 20 May 2015, and in advance of that will publish a
Notification of Close Period on 31 March. While its final results
remain subject to the factors set out in its six-month financial
report in November, it still expects that it will report:
-- an increase in the full-year dividend that will be at least equal to RPI inflation(3) ; and
-- adjusted earnings per share(3) for 2014/15 that will be
around the level achieved in 2013/14.
Shareholders have either invested directly in SSE or, as owners
of the company, enabled it to borrow money from debt investors to
finance investment totalling over GBP7bn since April 2010 in
maintaining, upgrading and building energy assets that customers
depend on. SSE aims to give them a return on their investment
through the payment of dividends and SSE's objective for 2015/16 is
to deliver a full-year dividend increase of at least RPI
inflation.
As stated in its interim results statement in November 2014, in
view of the wider energy sector conditions, SSE continues to
recognise that its ability to deliver increases in adjusted
earnings per share is subject to additional risk in 2015/16 and
2016/17.
(3) As defined in SSE's interim results statement in November 2014.
Result of the capacity auction in December 2014
The completion of the first capacity auction in December 2014
was a major milestone in the implementation of a series of reforms
affecting electricity generation in Great Britain. The capacity
market, the carbon price support mechanism, contracts for
difference and the emissions performance standard, along with the
supplemental balancing reserve, represent the biggest change in
electricity generation since privatisation.
SSE secured agreements to provide a total of 4,409MW of de-rated
generation capacity from October 2018 to September 2019 at a price
of GBP19.40/kW as a result of the auction. This means capacity
totalling 2,796MW did not secure an agreement, including
Ferrybridge, Peterhead, one unit at Fiddler's Ferry and the
proposed new gas-fired station at Abernedd. In line with its
statement on 19 December, SSE is continuing to analyse generation
market conditions and opportunities for 2015 and beyond.
Acceptance of Ofgem proposals in electricity distribution and
transmission
In December 2014, SSE confirmed its intention to accept Ofgem's
proposals for the price control for its two electricity
distribution subsidiaries for the eight years from 1 April 2015.
SSE is committed to delivering good performance during this new
price control which will require the achievement of efficiencies
and the delivery of a stronger, more robust network to drive
improved customer service while also providing a fair return to
investors.
In January 2015, SSE confirmed its intention to accept Ofgem's
proposals for the funding of the new Caithness-Moray electricity
transmission link at a cost of GBP1,118m and with regulatory
arrangements that allow it to apply for additional funding during
construction if required. The link will enable the connection of
1.2GW of new renewable electricity generation following completion
in 2018 and will help to support over 600 jobs during construction.
SSE expects to invest around GBP600m in electricity transmission
assets in 2015/16 and the Regulated Asset Value of SSE's
transmission business is expected to increase from just over
GBP1.5bn now to over GBP2.5bn by March 2017.
On 21 January, Ofgem announced it has used its competition
powers to open an investigation into whether SSE put its
competitors at a disadvantage in the electricity connections
market. As Ofgem stated, the fact that it has launched an
investigation does not imply that SSE has breached competition law
and SSE will co-operate fully and constructively with Ofgem in the
coming months.
Competition and Markets Authority investigation and UK general
election
SSE pointed out in its interim results statement in November
2014 that the capacity market auction, the electricity distribution
price control review, the CMA investigation into the GB energy
market and the UK general election all presented a degree of
uncertainty and risk but also presented the opportunity to achieve
a stable policy and regulatory framework that gives customers
confidence, allows regulators to regulate and encourages investors
to invest in the GB energy market.
The completion of the first capacity market auction and of the
electricity distribution price control review means that the
political and regulatory focus is now on the implications of the UK
general election in May and the CMA investigation. The CMA is
expected to publish an annotated statement of issues in the next
few weeks and to set out its provisional findings and possible
remedies (if required) in May or June. In engaging with both the
CMA investigation and with the political parties, SSE continues to
highlight those features of the GB energy market that are
well-functioning and benefiting customers while also proposing
sustainable solutions to address widely-shared objectives.
Household energy prices in Great Britain
SSE will reduce household gas prices in Great Britain by 4.1% on
30 April 2015 and will cap gas prices at their new level, and
household electricity prices at their existing level, until at
least July 2016.
This price cut will save a typical household customer(4) GBP28
per year and, when combined with the previous cut implemented on 24
March 2014, means that SSE's average annual standard gas bill will
be 7.0% lower than it was in March 2014. SSE's commitment not to
increase household energy prices to January 2016 will be extended
until at least July 2016. This means that SSE's household energy
prices will not have gone up for more than two and a half years.
Prices will, in fact, have come down at least twice in that period
and SSE remains committed to cutting household energy prices again,
if it can.
Wholesale energy costs, however, now make up less than half of
the typical household energy bill. There are significant other
costs within energy bills, including those relating to
government-sponsored environmental and social policies and the
roll-out of smart meters. SSE believes that such policies should be
funded in a more progressive way related to people's ability to pay
and believes that the GB-wide smart meter roll-out should be
subject to review to identify what can be done to minimise its
costs and optimise its benefits to all energy consumers in GB.
(4) Based on consumption of 13,500 kWh gas and 3,300 kWh
electricity and including VAT
Next steps in value programme
In March 2014, SSE announced a value programme to secure
operational efficiencies and to complete asset and business
disposals, with the overall objective of streamlining and
simplifying the business. The programme is on course to achieve its
objectives with:
-- completed transactions to dispose of assets with a total value of GBP440m;
-- 90% of the GBP100m target annual savings in overheads being realised to date; and
-- the process to dispose of onshore wind farm assets now under way.
SSE will continue to focus on business simplification and
operational efficiency and will set out the next steps in its value
programme by its full year results presentation in May 2015.
Fulfilling SSE's core purpose
SSE's ability to achieve its first financial objective of annual
dividend growth that at least keeps pace with RPI inflation is
ultimately dependent on fulfilling successfully its core purpose of
providing the energy people need in a reliable and sustainable way,
and it is the fulfilment of that core purpose which will continue
to be the focus of its long term strategic, investment and
operational decisions in 2015/16 and beyond.
Enquiries
Sally Fairbairn - Director of Investor Relations +44 (0)845 0760
530
Lee-Ann Fullerton - Head of Media +44 (0)845 0760 530
This information is provided by RNS
The company news service from the London Stock Exchange
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