Interim Management Statement

RNS Number : 7212P

Scottish & Southern Energy PLC

22 July 2010

 



SCOTTISH AND SOUTHERN ENERGY PLC

INTERIM MANAGEMENT STATEMENT

SSE (Scottish and Southern Energy plc) will today advise shareholders at its Annual General Meeting in Bournemouth about its performance since the start of the current financial year, which began on 1 April 2010. This Interim Management Statement includes updates on operations, major projects, other developments and the financial outlook.

Operational update
In the three months to 30 June 2010 (comparisons with the same three months in 2009, unless otherwise stated):

·     SSE's Total Recordable Injury Rate was 0.10 per 100,000 hours worked, compared with 0.14 during 2009/10 as a whole;

·     the number of electricity and gas supply customer accounts in the energy markets in Great Britain and Ireland  increased by 100,000 to 9.45 million; including home services, SSE's total customer base is now 9.87 million, up from 9.5 million a year ago;

·     gas-fired power stations achieved 97% of their maximum availability to generate electricity, excluding planned outages; coal-fired stations achieved 90%*;

·     output from gas-fired and coal-fired power stations was 5,450GWh, compared with 5,085GWh*;

·     renewable energy output (from conventional hydro electric schemes, wind farms** and dedicated biomass plant) was 700GWh, compared with 1,000GWh, reflecting weather conditions;

·     underlying consumption of electricity by SSE's household customers in Great Britain fell by 2.0 %; underlying consumption of gas by SSE's household customers fell by 2.4 %;

·     the number of Customer Minutes Lost in the Scottish Hydro Electric Power Distribution area was 16, compared with 14; in the Southern Electric Power Distribution area it was also 16, compared with 14; and

·     the amount of replacement and reinforcement gas mains laid by Scotia Gas Networks was 325km, compared with 310 km.

* Wholly-owned coal-fired power stations and gas-fired power stations

 **Output from wholly-owned wind farms used by SSE to supply customers

Major Projects update

In its Annual Report 2010, SSE set out its investment priorities for 2010/11, including delivering additional assets and meeting other key programme milestones in renewable energy, electricity networks and gas storage.

Since then, progress has been made in the following key areas:

·     Clyde onshore wind farm (350MW):  the wind farm is being developed in three sections - South, Central and North.  The most advanced section is the South (130MW), where the first turbine bases have now been laid, in advance of turbine installation starting by the autumn of this year.  The South section should be completed by the end of 2011 and the entire wind farm should be completed in 2012.  Work is also continuing to resolve the outstanding radar-related issues associated with the consent granted for the development. 

·     Griffin onshore wind farm (156MW):  the principal contractor for the wind farm has now been appointed, and main construction works are getting under way.  Turbine installation is expected to begin in the first half of 2011, with the wind farm due to be commissioned in 2012.

·     Greater Gabbard offshore wind farm (500MW; 50% stake): more than 110 foundation monopiles, 90 transition pieces and 10 turbines have now been installed offshore, as have both transformer platforms.  Commissioning of the onshore substation is well-advanced.  Installation of the first export cable is complete and installation of the inter-array cables is well under way.  The first turbines are expected to be commissioned in late summer and early autumn, and the first export of electricity will then take place.  The entire wind farm remains scheduled to be completed in 2012.

·     Walney offshore wind farm (367MW; 25.1% stake):  more than 30 foundation monopiles and 30 transition pieces have now been installed offshore and the first turbine was installed earlier this month.  The offshore substation for the first phase of the development has also been installed.  The first phase (183.6MW) is expected to be commissioned in the first half of 2011 and the second phase in the first half of 2012.

·     Beauly-Denny replacement electricity transmission line:  good progress has been made in satisfying the conditions associated with Scottish Ministers' consent to replace the Beauly-Denny line which apply to the SSE section (Beauly to Wharry Burn).  SSE remains on course to complete preliminary construction works, with a value of over £50m, during the current financial year.

·     Aldbrough gas storage capacity (up to 370mcm; 66.6% stake):  the development already provides a total of 115mcm of capacity in four caverns.  A further 85mcm of capacity is expected to become available by March 2011, with the development as a whole scheduled to be completed in 2012.

A cumulative total of around £1.3bn has been invested by SSE in assets which were still largely under construction at 30 June 2010 and therefore have yet to make any substantive contribution to earnings.  This includes over 950MW of on- and offshore wind farm capacity currently under construction.

Other developments

Since the publication of its preliminary results on 19 May 2010, SSE has also:

·     commissioned over 80MW of new onshore wind farm capacity;

·     sold its 100% interest in Ardrossan Windfarm (Scotland) Ltd for a cash consideration of £28.1m and a debt transfer of £25.7m;

·     started a process which could lead to the sale of its equity interest (totalling 132.8MW) in three of its existing operating wind farms in Scotland and one in Northern Ireland, consistent with its commitment to optimise its overall wind energy portfolio;

·     been awarded a 25-year contract with Nottingham City Council for the replacement and maintenance of over 40,000 lighting columns and illuminated signs, under the Private Finance Initiative;

·     announced that it will not seek to acquire any substantial ownership interest in the electricity distribution networks currently owned by EDF Energy Networks; and

·     made major progress towards completing the acquisition of North Sea natural gas assets from Hess Limited, capable of providing approximately 6% of its needs in 2012, for a cash consideration of $324m.

Financial outlook
SSE remains on course to deliver its dividend growth targets in the years ahead and, specifically, to deliver a dividend increase of at least 2% more than RPI inflation in respect of 2010/11, while maintaining a dividend cover consistent with its established range.

SSE will publish its six month results for 2010/11 on 10 November 2010.  It continues to believe that adjusted profit before tax is a means to an end: sustained real growth in the dividend.  In measuring adjusted profit before tax, SSE focuses on the full year, as opposed to six months, because half-year results are more likely to fluctuate, with unusual variations or circumstances. 

Ian Marchant, Chief Executive of SSE, said:

"The last few months have been marked by unusually low output of renewable energy and increases in wholesale gas prices.  In this challenging environment, we have achieved solid progress across our main operations and investment projects, which means we remain on course to deliver our dividend growth target for the year of at least 2% more than inflation."

 

END

 

 

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