TIDMSSE
RNS Number : 5659L
SSE PLC
20 July 2017
SSE plc
TRADING STATEMENT
SSE plc completed the first quarter of its 2017/18 financial
year on 30 June 2017 and its Annual General Meeting is taking place
today (20 July) in Perth. This trading statement provides
information on its operational and investment activities in the
first quarter of the financial year including:
-- operational performance in SSE's Wholesale, Networks and Retail businesses;
-- progress made in SSE's plans to invest around GBP1.7bn in
2017/18 in energy infrastructure in the UK and Ireland;
-- confirmation that SSE is continuing to target an increase in
the full-year dividend for 2017/18 of at least RPI inflation, with
annual increases thereafter of at least RPI inflation also being
targeted; and
-- confirmation that SSE is continuing to work to keep dividend
cover for 2017/18 within the expected range of around 1.2-1.4
times, although as previously indicated, it remains likely to be
towards the bottom of that range.
Alistair Phillips-Davies, Chief Executive of SSE, said:
"As expected, 2017/18 is presenting a number of complex
challenges to manage, but SSE is a focused, resilient and adaptable
business with efficient operations and disciplined investment at
its core. There continues to be significant change across the
energy sector, but also opportunities for responsibly-minded
businesses to contribute positively to its direction in the
interests of customers and investors alike. Our priorities remain
to support positive outcomes for customers, provide reliable and
sustainable energy and deliver annual dividend growth for investors
that at least keeps pace with inflation."
Focusing on delivering operational efficiency
Central to SSE's strategy is operational efficiency across its
Wholesale, Networks and Retail (including Enterprise) businesses,
and performance in the three months to 30 June 2017 is summarised
below.
Fundamental to this is safety. The Total Recordable Injury Rate
for SSE employees and employees of other companies working on SSE
sites was 0.20 per 100,000 hours worked, compared with 0.26, on a
rolling 12 month basis.
3 months 3 months
to 30-Jun-2017 to 30-Jun-2016
------------------------------------------------ ---------------- ----------------
Wholesale
Gas- and oil-fired (incl. CHP) generation
output - GWh 5,350 4,400
Coal-fired generation output - GWh 0 0
Hydro generation output (incl. pumped storage)
- GWh 488 583
Wind generation output - GWh 1,108 908
Biomass generation output - GWh 17 18
Gas production - m therms 130 158
Gas production - mmboe 2.15 2.56
Liquids production - mmboe 0.19 0.20
------------------------------------------------ ---------------- ----------------
Output from electricity generating plant in which SSE has an
ownership interest (output based on SSE's contractual share).
Wind output excludes 80MWh of constrained off generation in
Q1 2017/18 and 35MWh in Q1 2016/17.
Fiddler's Ferry coal fired power station used more electricity
than it generated in the 3 months to 30 June, therefore net
generation is reported at zero.
Networks
Customer minutes lost (SHEPD) - average
per customer 12 14
Customer minutes lost (SEPD) - average
per customer 10 10
Customer interruptions (SHEPD) - per 100
customers 13 16
Customer interruptions (SEPD) - per 100
customers 13 11
------------------------------------------------ ---------------- ----------------
Excludes exceptional events
Retail
Electricity supplied household average
(GB) - kWh 793 821
Gas supplied household average (GB) - th 66 78
As at As at
30-Jun-2017 31-Mar-2017
------------------------------------------------ ---------------- ----------------
Total energy customer accounts (GB, Ire)
- m 7.77 8.00
Total Smart meters installed over 600,000 over 500,000
Home Services customer accounts (GB) -
m 0.47 0.47
------------------------------------------------ ---------------- ----------------
The average temperature in the UK in the three months to 30 June
2017 was 0.9C warmer than the same period in 2016; energy
consumption by household customers was lower. During the period,
rainfall in the north of Scotland was slightly above average
although low hydro storage levels at the start of the period meant
hydro output was lower than expected. Wind speeds were 0.5 to
1.0m/s above average across Scotland and very close to average
across Ireland, which contributed to the higher amount of
electricity generated from wind farms compared with the same three
months in 2016.
Creating value from capital and investment expenditure
SSE continues to expect that its capital and investment
expenditure will total around GBP1.7bn in 2017/18 and be around
GBP6.0bn across the four years to March 2020 mainly in electricity
networks and renewable energy. It is on course to create
significant value and deliver by then: an increase in its capacity
for generating electricity from renewable sources, including pumped
storage, to 4.3GW; and an increase in the Regulatory Asset Value of
its economically regulated networks businesses to close to GBP9bn.
Progress with SSE's major investments since 1 April 2017
includes:
-- Wholesale onshore wind: At 31 March 2017, SSE had seven
onshore wind farm projects in construction, comprising 260 turbines
and a total net capacity of 761 MW when complete. At 30 June, 123
of these turbines were capable of exporting electricity and the six
wind farms scheduled to be completed by the end of 2017 remain on
course to be so. The construction of the seventh wind farm,
Stronelairg, remains on course to be completed in 2018. The full
benefits of the returns earned from this investment in onshore wind
are still expected to be reflected in adjusted earnings per share
towards the end of this decade and beyond.
-- Wholesale offshore wind: The Beatrice offshore wind farm
(588MW; SSE share 235MW) is continuing to progress in accordance
with the terms of the Investment Contract awarded to it by the UK
government in 2014 and is still expected to be fully operational in
2019.
-- Networks transmission: The new Caithness-Moray transmission
link remains on schedule to be commissioned by the end of 2018 with
good progress being made on both the subsea cable and the onshore
infrastructure.
In addition, SSE is fulfilling its obligation to offer smart
meters to its Energy Supply customers in GB. At 30 June 2017, SSE
had installed over 600,000 smart meters in customers' homes. Post
installation, SSE's meters will transfer to a contracted Meter
Asset Provider, so SSE's investment and capital expenditure
excludes the capital cost of installation and meter assets. SSE
welcomes the inclusion of a Smart Meter Bill in the UK Government's
legislative programme. The planned legislation will extend by five
years the UK government's ability to make changes to smart meter
regulations, which can help to ensure the rollout is delivered
effectively, and that the future benefits for customers are
maximised.
Key developments since 17 May 2017
Since SSE published its Preliminary Results for 2016/17, there
have been important developments in the energy sector:
-- Wholesale: It has been announced by National Grid in June
2017 that the T-1 capacity market auction for 2018/19 will take
place in January 2018, with a target volume of 6.0GW, and that the
T-4 capacity market auction for delivery in 2021/22 will take place
in February 2018, with a target volume of 50.1GW. SSE also welcomes
Ofgem's decision in June 2017 to reduce a specific payment that
some small electricity generators receive for producing electricity
at peak times as the level of this payment is distorting the
capacity and wholesale markets.
-- Networks: Ofgem set out in June 2017 its 'minded to' position
on financial adjustments relating to the Distribution Price Control
for 2010-15, based on the extent to which electricity distribution
companies have delivered the outputs they committed to. SSE's
Scottish and Southern Electricity Networks (SSEN) delivered all of
the benefits required under its major capital schemes, asset
health, network loading and fault performance and so will not be
subject to an allowance adjustment in respect of these areas. As a
result of lower electricity demand across the five-year period and
reduced requirement for network reinforcement, however, SSE will
experience a total revenue reduction of around GBP3m spread over
the period to 2023.
In July 2017, in launching its 'Framework Review Stage' Ofgem
said that investors should prepare for lower returns from 2021,
with 'tougher' price controls to maintain good value for customers.
SSE believes the RIIO regulatory framework is delivering the
highest-ever standards of customer service in the sector and record
levels of investment in a robust and secure network. There are also
opportunities as networks evolve in line with changes to how
electricity is produced and used and SSE will respond
constructively to the questions raised by Ofgem at this initial
stage in the development of the post-2021 Price Controls.
-- Retail: In June 2017, the Secretary of State for Business,
Energy and Industrial Strategy wrote to Ofgem seeking advice on its
plans in relation to the energy supply market. Ofgem responded on 3
July 2017 with proposals including the option of a 'safeguard
tariff' for vulnerable customers and plans to make it 'even easier'
for customers to switch their energy supplier. It said it would
work with the industry and other stakeholders 'as we move towards a
smarter, fairer, and more competitive energy market' and SSE will
engage constructively. SSE believes that competition should be at
the heart of the retail energy market and in line with that
promotes a range of tariffs, products and services. The GB domestic
energy market remains highly competitive and in the first three
months of 2017/18 SSE continued to experience a net loss in total
customer account numbers.
-- Enterprise: In June 2017 the UK government confirmed that its
legislative programme 'will work to attract investment in
infrastructure to support economic growth' with new legislation
announced covering electric vehicles and the next phase of
high-speed rail, to complement the rollout plans for telecoms
infrastructure underpinning mobile and broadband services. Whilst
still relatively small compared to the rest of the SSE group, this
public policy direction presents opportunities to grow SSE's
Enterprise businesses, both in terms of its energy-related
businesses (utilities, rail, contracting) and its telecoms
business, which will seek to provide additional communications
infrastructure and services to these growing telecoms markets in
Great Britain and Ireland.
Consolidated Segmental Statements
SSE published its Consolidated Segmental Statements (CSS) for
2016/17 on sse.com on 19 July 2017, the content of which was
previewed in its Preliminary Results statement in May and which is
in line with that statement.
Share Buy Back Programme
In line with its Interim Results Statement in November 2016, SSE
is intending to use around GBP500m of the proceeds from the 16.7%
equity stake divestment in Scotia Gas Networks Limited ('SGN') to
return value to shareholders by way of an on-market share buy-back.
At 14 July 2017, SSE had completed GBP323m of the buy-back,
including GBP192m of shares purchased since 1 April 2017, with the
process expected to be concluded by 31 December 2017.
Financial outlook
SSE continues to fulfil its core purpose of providing the energy
people need in a reliable and sustainable way. It operates with a
clearly-defined and long-term strategic framework built around a
continued focus on efficient operations and disciplined investment.
The financial objective of SSE's strategy is to give shareholders a
return on their investment through the payment of a full-year
dividend that increases annually by at least RPI inflation in
2017/18 and beyond. SSE remains on course to deliver this.
As stated in its Preliminary Results, SSE is working to keep
dividend cover in 2017/18 within the expected range of around 1.2
to 1.4 times, although it is likely to be towards the bottom of it,
which means adjusted earnings per share in 2017/18 is likely to be
lower than it was 2016/17; and as also stated in the Preliminary
Results, the level of dividend cover remains subject to the ongoing
factors that influence earnings in SSE's market-based
businesses.
Notification of Close Period
SSE will issue a Notification of Close Period statement on
Wednesday 27 September 2017.
Enquiries
Investors and Analysts ir@sse.com +44 (0)845 0760 530
Media media@sse.com +44 (0)845 0760 530
Notes
1.Adjusted earnings per share describes earnings per share based
on adjusted profit after tax which excludes exceptional items and
re-measurements arising from IAS39, deferred tax and interest costs
on net pension scheme liabilities. Further details on pages 101-104
'Adjusted Performance Measures' of SSE's 2017 Annual Report.
This information is provided by RNS
The company news service from the London Stock Exchange
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