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Company moving to gas and renewables

SSE takes ‘difficult’ decision to close Ferrybridge power station

FerrybridgeEnergy company SSE is to close the loss-making Ferrybridge coal-fired power station in Yorkshire in the face of difficult political and regulatory conditions, said chairman Lord Smith.

The company said the decision follows its switch from gas and coal towards a portfolio more weighted towards gas and renewable sources of energy. Its Fiddlers Ferry station in Lancashire will remain open with specific environmental and operating constraints.

Both SSE’s coal-fired  stations are approaching 50 years old and the company said they are proving increasingly expensive to maintain while having to compete with more efficient modern gas plant. EU directives on emissions are adding to the costs.

The company said the long-term trend points to gas being cheaper than coal, leading in turn to a greater use of gas-fired plant in the electricity mix.

In a statement it said: “Based on the conclusions of this review SSE has, regrettably, made the difficult decision to cease coal-fired electricity generation at Ferrybridge by 31 March 2016.

“We know that the decision to end coal-fired generation at Ferrybridge will have an impact on the local community and it has not been taken lightly; but while this was a difficult decision to take, it was the right one.

“Financially, the station is currently loss-making and is anticipated to lose another £100m over the next five years; and environmentally coal is a major emitter of CO2, which means it has a time-limited role in the UK’s electricity mix. Unfortunately, this means retaining coal-fired operations at Ferrybridge beyond the end of the current financial year is not sustainable.”

SSE currently employs 172 people at Ferrybridge.  It is expected that some of these will be offered jobs elsewhere in the SSE group, including at Keadby power station, which is being brought out of ‘deep mothball’ or will have a continuing role beyond March 2016 in managing the closure and decommissioning of the plant.  SSE will also offer employees voluntary release on enhanced terms, and seek to avoid compulsory redundancies.”

Lord Smith, who will step down as chairman in the summer, said trading conditions were proving tough on a number of fronts.

“The 2014/15 financial year was expected to present a number of major challenges, and it certainly did,” he said.

“Politics and regulation loomed large with the first-ever auction for electricity generation capacity, the CMA [Competition and Markets Authority] investigation into the energy market, final proposals from Ofgem on the eight-year price control in electricity distribution and the extended build-up to the recent UK general election.

“Market conditions for thermal power stations have been persistently difficult, requiring us to take the difficult decision we have announced this morning to end coal-fired generation at Ferrybridge power station by next March; the new price control in distribution is driving significant change; and energy supply has once again proved to be a highly competitive business.

“We have throughout this maintained a strong focus on the needs of customers, with a significant reduction in the number and duration of power cuts experienced by our distribution customers; a price reduction and extended price guarantee for our household energy customers across Britain; and new, integrated services for our business customers.

“This focus on customers has been allied to strong financial discipline, with the value programme to streamline and simplify the business  delivering significant cost savings and other efficiencies.  As I prepare to step down from the Board in July, I am confident that SSE is on a very sound footing to maintain its position as one of the most reliable dividend-paying stocks in the FTSE 100.”

Adjusted profit before tax increased by 0.9% to £1.564.7 billion and reported profit before tax increased by 24.1% to £735.2m.

The board is recommending a final dividend of  61.8p per share, to which a scrip alternative is offered, compared with 60.7p in the previous year, an increase of 1.8%.  This will make a full-year dividend of 88.4p per share which is an increase of 2% compared with 2014/15.

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