Chairman says figures 'regrettable'
SSE profits plunge as renewable energy division created
SSE will bring together its renewables assets in one division
Scottish energy giant SSE has reported a 41% plunge in half-year profits as it announced another reshuffle of its assets under a new management structure.
The Perth-based FTSE 100 company said it intends to consolidate the development, operation and ownership of its renewable energy assets in the UK and Ireland under a single entity to be known as SSE Renewables.
The news came days after it announced delays to its retail tie-up with Npower. In today’s interim statement it says “there is now some uncertainty as to whether this transaction can be completed, as originally contemplated.
“Nevertheless, the board believes that the best future for SSE Energy Services, including its customers and employees, will continue to lie outside the SSE group.”
Adjusted half year profit before tax fell to £246.4m (2017: £416.7m) and a bottom line reported loss before tax of £265.3m excluding SSE Energy Services which is being sold in the merger with Npower.
SSE said it will still raise its interim dividend for 2018/19 by 3.2% to 29.3p and intends to recommend a full-year dividend of 97.5p per share for 2018/19 and to deliver the five-year dividend plan set out in May 2018.
Mr Gillingwater said: “Although our half-year results are slightly ahead of the position we set out in September, they fall well short of what we hoped to achieve at the start of the year. This is disappointing and regrettable, but important changes are now being made to the way SSE manages its exposure to energy commodities.
“The commercial terms of the proposed combination of SSE Energy Services and npower are the subject of ongoing discussions, and creating a new independent energy supplier remains our objective. The board believes that the best future for SSE Energy Services, including its customers and employees, lies outside the SSE group.
“Looking ahead, we are taking forward the strategy we set out in May to position SSE as a leading energy company in a low carbon world, with a focus on regulated networks and renewables, complemented by flexible thermal generation and business energy sales. Material progress is being achieved in these businesses, which make up most of the value in SSE.
“The 29.3 pence interim dividend that we have announced today is the first step in delivering our five-year dividend plan and paves the way for the 97.5 pence full-year dividend that we expect to recommend in May.
“This is a company with a clear strategy for its core businesses and highly valuable assets in a sector that’s yielding investment opportunities that go with the grain of political, economic and environmental focus on decarbonisation, and it is this that will support the delivery of our dividend plan in the years to come.
The firm will bring together its assets in onshore and offshore wind, hydro electricity and pumped storage.
It says it is a step towards SSE’s place in a low carbon world and will allow it to pursue more opportunities in different markets. The company said it has begun assessing “potential opportunities”.
The group’s operational assets amount to 4GW, with actual capacity subject to the potential sale of stakes of up to 50% in the Stronelairg and Dunmaglass onshore wind farms.
SSE Renewables will have its own and dedicated and experienced management team. Jim Smith currently SSE’s managing director, generation, has been appointed managing director Designate for SSE Renewables.
Reporting to wholesale director Martin Pibworth, he will lead the work being done to prepare for the formation of the new entity, which is expected to be largely complete by the end of the current financial year.
Alistair Phillips-Davies, group chief executive, said: “The creation of SSE Renewable is the latest step in our strategic goal to give greater focus to renewable energy, give investors greater visibility of assets and earnings in the future and give each of the businesses in SSE the best platform for success.
“Success will mean maximising SSE’s contribution to the ongoing decarbonisation of the electricity system and creating value for shareholders and society in a sustainable way, with a clear focus on maximising future growth opportunities.
“SSE has a unique portfolio of renewable energy assets and a valuable pipeline of future opportunities. The creation of SSE Renewables will build on SSE’s established skills in asset management and large capital project development and put the business in a strong position to evolve and succeed in a rapidly-changing electricity sector.”
David Barclay, head of office at Brewin Dolphin Aberdeen said: “It’s been a tough year for SSE. An abnormally warm and calm summer resulted in lower than expected output from its wind farms and hydro-electric stations, while gas prices went in the other direction. It was no surprise then that, in this morning’s announcement, the company said profits have dipped about 40%.
“The company’s shares are down around 18% in the past six months and nearly a quarter on two years ago.
“Although not in serious trouble yet, this latest update suggests it’s not going to get easier any time soon for SSE, with growth still static and uncertainty ever-present.”