Interim Management Statement

RNS Number : 5819G

Scottish & Southern Energy PLC

03 February 2010

 



SCOTTISH AND SOUTHERN ENERGY PLC

INTERIM MANAGEMENT STATEMENT

SSE (Scottish and Southern Energy plc) remains on course to deliver the financial and operational goals for the period to 31 March 2010 set out in its financial report in November 2009.  This Interim Management Statement includes updates on operations, major projects, issues such as household customers' energy consumption, other developments and the financial outlook.

Operational Update

In the nine months to 31 December 2009 (comparisons with the same nine months in 2008, unless otherwise stated):

·     SSE's Total Recordable Injury Rate was 0.13 per 100,000 hours worked, compared with 0.16 during the whole of 2008/09;

·     its number of electricity and gas supply customer accounts in the Great Britain market increased by 200,000 to 9.25 million; including customers in the all-island market in Ireland and home services, SSE's total customer base is now 9.75 million;

·     wholly-owned gas-fired power stations achieved 93% of their maximum availability to generate electricity, excluding planned outages, compared with 76%; coal-fired stations achieved 93%, compared with 89%; wind farms achieved 97%, compared with 96%;

·     the number of units of electricity distributed was 30TWh, compared with

            31.2TWh;

·     the number of Customer Minutes Lost in the Scottish Hydro Electric Power Distribution area was 53, compared with 52; in the Southern Electric Power Distribution area it was 49, compared with 47;

·     the amount of gas transported by Scotia Gas Networks, in which SSE has a 50% stake, was 97TWh, compared with 110.7TWh; and

·     the amount of replacement and reinforcement gas mains laid by SGN was 917km, compared with 835km.

Major Projects Update

In its six-month financial report in November 2009 SSE stated that its priorities for the rest of the financial year 2009/10 include delivering efficient investment throughout its activities, especially in the major projects in generation, electricity networks and gas storage.  Since then, progress has been made in the following key areas:

·     Marchwood:  The new 840MW combined cycle gas turbine power station at Marchwood, near Southampton, in which SSE has a 50% ownership interest, entered full commercial operation in December 2009, making it the UK's first new large-scale CCGT power station to enter commercial operation for five years.  The completion took the capacity of SSE's electricity generation portfolio, including its share of joint ventures, to just over 11,500MW. Marchwood is expected to deliver a thermal efficiency in excess of 58% and all of its output is contracted to SSE.  The station has performed as expected since it entered commercial operation, with no operational issues.

·     Greater Gabbard:  Offshore construction work is continuing at the 500MW offshore wind farm being developed by Greater Gabbard Offshore Winds Limited ("GGOWL"), a 50:50 joint venture between SSE and RWE npower renewables.  Following the initial delay in commencing foundation installation, good progress has been made and a total of 69 of the 140 turbine foundation monopiles have now been installed, as has the first of two offshore transformer platforms.  GGOWL has received a claim for additional costs relating to foundation monopiles which it expects to resolve satisfactorily as part of the normal contractual process. Commissioning of the onshore sub-station is under way and installation of the first turbines will commence in the next few months.  Greater Gabbard is expected to have a load factor of over 40% and produce around 1,900GWh of electricity in a typical year, of which SSE will take 50%.  The wind farm is expected to require a total investment by SSE of around £650m, excluding connection to the electricity grid.  The development remains on course to be completed in 2012.  In December 2009, the UK government announced that two Renewable Obligation Certificates (ROCs) will be earned by the output of all offshore wind projects accredited between April 2010 and March 2014.

·     Clyde:  Work at the site of SSE's 350MW Clyde wind farm in southern Scotland is continuing, following the resolution of the secondary, and some of the primary, radar-related issues associated with the consent granted for the development.  C A Blackwell (Contracts) Ltd has been appointed as the main works contractor for the South section of the wind farm. Clyde is expected to have a load factor of around 35% and produce over 1,000GWh of electricity in a typical year.  The first phase of the development should be completed in 2011 and the second phase in 2012.  Its total construction cost is expected to be around £500m.

·     Griffin:  Pre-construction work is also well under way at the Griffin wind farm site in Perthshire, in which SSE now has a 100% stake.  The tendering process for turbines is expected to be completed shortly and the capacity of the wind farm will be determined as part of that.  The annual output is expected to be between 350GWh and 400GWh.  Its construction cost is expected to be around £200m and it should be completed in 2012.

·     Beauly-Denny:  Scottish Ministers announced in January that they have granted consents, with associated conditions, to install a 400,000 volt overhead electricity transmission line to replace the existing 132,000 volt overhead transmission line between Beauly and Denny.  The existing line will be dismantled.  The final cost of replacing the Beauly-Denny line can only be established once analysis of all of the conditions associated with the consent has been completed; and full construction work can only begin once it is clear that all of the conditons can be satisfied and Ofgem is able to confirm the investment is necessary, efficient and economical.  On its initial analysis, SSE has concluded it should be able to undertake preliminary construction works this year, with a further four summers of construction work required to complete the new line.

·     Aldbrough:  SSE and Statoil (UK) Ltd are continuing to make progress at their gas storage facility being constructed at Aldbrough in East Yorkshire.  Capacity for storage at Aldbrough became available in a third cavern in December 2009, taking the current total to around 100 million cubic metres (mcm).  Storage in a fourth cavern should become available within the next few months.  The project remains on course for completion in 2012.

Glendoe Update

SSE is close to completing an agreement with the contractor who will carry out the remedial work to overcome the blockage in the tunnel carrying water from the reservoir to the power station, thus restoring electricity generation at the Glendoe hydro electric scheme.  Nevertheless, it remains unlikely that any electricity will be generated at Glendoe until the financial year 2011/12.

Household Customers' Energy Consumption

The latest analysis states that consumption of gas by SSE's household customers was around 5% lower per customer between 1 October 2009 and 31 January 2010 than in the same period 12 months before; consumption of electricity was around 4% lower per customer.  During January, SSE gave all of its 280,000 gas pre-payment meter customers a £12 credit, which around 200,000 customers have already cashed in.  This was designed to help these customers during the period in which they normally use most gas to heat their homes.

Other Developments

Since the publication of its six-month financial report in November, SSE has also:

·     on balance, accepted Ofgem's final proposals for the electricity distribution price control for the five years from 1 April 2010;

·     deployed, in conjunction with Smarter Grid Solutions, smart grid technology on its power distribution network in Orkney to allow connection of increased amounts of renewable energy;

·     entered into a 50:50 joint venture with DONG Energy to take forward the development of three offshore wind farms in the Dutch sector of the North Sea, with a total capacity of around 1,000MW;

·     acquired from DONG Energy a 25.1% stake in the 367MW Walney offshore wind farm being developed in the Irish Sea;

·     secured from The Crown Estate, as part of two consortia, development partner status for Round 3 of its offshore wind farm development programme, with its capacity share of the proposed wind farms totalling around 4,000MW; and

·     nominated Gavin Brydon, formerly SSE's Group Treasurer, to be appointed Finance Director of the consortium that is seeking to develop new nuclear power generating plant at a site adjacent to Sellafield in Cumbria.  Brandon Rennet has added Treasury responsibilities to his existing Corporate Finance responsibilities in SSE.

 

Financial Outlook

SSE also remains on course to deliver a moderate increase in adjusted profit before tax for 2009/10 as a whole.  Its balance sheet remains one of the strongest in the global utility sector.  SSE's corporate credit ratings are 'A-' (Standard & Poors) and 'A3' (Moodys). 

SSE remains on course to deliver sustained real dividend growth in the years ahead and, specifically, to deliver a full-year dividend of at least 70 pence per share in respect of 2009/10 (compared with 66 pence in 2008/09).  Its defined dividend targets for 2010/11 and beyond will be set out by its full-year results statement, to be published on Wednesday 19 May 2010.

Ian Marchant, Chief Executive of SSE, said:

"SSE has performed well in the second half of the financial year, with sound performance in our day-to-day operations and solid progress in our major investment projects.  As a result, we remain on course to deliver a moderate increase in adjusted profit before tax and a dividend of at least 70 pence per share for the full year.  Our priorities now are to round off this financial year successfully and make a good start to 2010/11." 

Presentation for Institutional Analysts

SSE is today holding in London the presentation for institutional analysts on its energy networks businesses referred to in its announcement of 16 December 2009.  The presentation slides will be placed on SSE's website today at 0930GMT.

 

END

 

 

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