Interim Management Statement

RNS Number : 7376W

SSE PLC

31 January 2013

 



SSE plc

INTERIM MANAGEMENT STATEMENT

SSE plc is on course to deliver an increase in the dividend per share and an increase in adjusted profit before tax for the financial year to 31 March 2013 and to achieve key operational and investment objectives.

This Interim Management Statement summarises SSE's performance since the start of the current financial year, which began on 1 April 2012, and includes updates on operations and investments in SSE's Networks, Retail and Wholesale businesses since the publication of its six-month results on 14 November 2012. 

It also includes a financial outlook, and SSE is forecasting an increase of around 4% to 5% in adjusted profit before tax for 2012/13 and an increase of at least 2% more than RPI inflation in the full-year dividend, to around 84 pence per share.

Operations
In the nine months to 31 December 2012 (comparisons with the same nine months in 2011, unless otherwise stated):

·     SSE's Total Recordable Injury Rate was 0.14 per 100,000 hours worked, compared with 0.11 during 2011/12 as a whole;

·     Networks: the number of Customer Minutes Lost in the Scottish Hydro Electric Power Distribution area was 52, compared with 54; in the Southern Electric Power Distribution area it was 49, compared with 46;

·     Networks: the amount of replacement and reinforcement gas mains laid by Scotia Gas Networks was 788km, compared with 768km;

·     Retail: SSE's number of electricity and gas customer accounts in markets in Great Britain and Ireland fell from 9.55 million to 9.46 million, including 130,000 customers gained through the acquisition of Phoenix Holdings Ltd that was completed in June 2012;

·     Retail: average consumption of electricity by SSE's household customers in Great Britain was estimated to be 2,991kWh, compared with 2,877kWh; average consumption of gas by SSE's household customers in Great Britain was estimated to be 9,186kWh, compared with 7,506kWh, reflecting cooler weather conditions during the nine months.  On a weather-corrected basis, however, there was a slight underlying reduction, of 0.1%, in average household electricity consumption and an underlying reduction of 2.2% in average household gas consumption;

·     Wholesale: total electricity output* from gas-fired power stations was 6.4TWh, compared with 18.6TWh, reflecting planned programmes of work being undertaken at Keadby and Medway and low 'spark spreads' for electricity; from coal-fired power stations output was 13.6TWh, compared with 10.7TWh; and

·     Wholesale: total electricity output* from renewable sources (conventional hydro electric schemes, onshore and offshore wind farms and dedicated biomass plant) was 5.2TWh, compared with 5.3TWh. Output from wind increased during the period due to new wind farm capacity becoming operational; hydro output, however, was down by over 40% compared with record output in 2011/12 as a result of rainfall in the catchment areas reverting to just below normal levels. On 28 December, SSE's renewable energy capacity, generating simultaneously in Great Britain, exceeded 2,000MW for the first time.

* Output from electricity generating plant in which SSE has an ownership interest (output based on SSE's contractual share).

Investment
In its Annual Report 2012, SSE set out its investment priorities for 2012/13, including commissioning new assets and meeting other construction and development milestones in its programme of investment in renewable energy, electricity networks and gas storage. It is now forecasting total capital and investment expenditure of just over £1.5bn for 2012/13 as a whole. In the 9 months since 1 April 2012:

·     Networks: SSE's subsidiary Scottish Hydro Electric Transmission has undertaken capital works totalling £260m, including the upgrade and reinforcement of the transmission network between Beauly and Dounreay, where construction work has been completed and commissioning work is now taking place, and has achieved a Regulated Asset Value of over £1bn for the first time;

·     Wholesale: SSE's onshore wind farm capacity (net) in operation has increased by 128MW to 1,431MW;

·     Wholesale: SSE's offshore wind farm capacity (net) has increased to 349MW as a result of the completion of Walney and Greater Gabbard (including its share of the capacity of the 52 disputed turbines);

·     Wholesale: Works are progressing well at SSE's 460MW CCGT development at Great Island in the South-East of Ireland. The steel structures for the boiler and turbine are now in place and the civil works are nearing completion. The process of transporting the turbine and generator to the site is also complete following a dozen heavy load deliveries, by barge, from Waterford port. They are scheduled to be placed on their respective foundations during February and March; and

·     Wholesale: The last of the nine caverns at the new Aldbrough gas storage facility developed by SSE and Statoil UK Ltd entered commercial operation in November 2012, meaning the site is now fully operational.  The facility continues to operate with high availability to meet commercial requirements and on 23 January it saw a record level of output, with over 18mcm of gas exported to the National Transmission System that day.

In addition, electricity generation resumed at the 100MW Glendoe hydro electric scheme in August 2012.  In the four months to December 2012 it produced 67GWh of electricity.

Other developments

Since the publication of SSE's six-month financial report on 14 November 2012:

·     Greater Gabbard Offshore Winds Ltd (GGOWL), in which SSE has a 50% stake, has received the First Partial Award of Fluor Ltd's claim against it. The Award was in GGOWL's favour, requiring no payment to be made by GGOWL to Fluor Ltd. There are a number of related claims and counter-claims which remain to be determined and these will be finalised at the next stage of the proceedings.

·     Commercial operations at the 214MW CHP plant operated by Derwent Cogeneration Limited, in which SSE has a 49.9% stake, have ceased.

·     SSE, through its wholly-owned subsidiary SSE E&P UK Limited, has entered into an agreement with BP to acquire its 50% working interest in the Sean gas field in the Southern North Sea for $288m (based on an effective date of 1 January 2012).  The transaction is progressing and is expected to be completed around the end of this financial year, subject to regulatory approvals.

·     Scotia Gas Networks, in which SSE has a 50% stake, has stated it is minded not to reject Ofgem's Final Proposals for the gas distribution Price Control for 2013-21.

·     Pricewaterhouse Coopers has announced the result of its UK 2012 Total Tax Contribution Survey for The Hundred Group, in which SSE ranked 17^th for the level of total taxes borne (the amount a company pays that are its own tax costs).

·     Alistair Phillips-Davies, currently Deputy Chief Executive, has been appointed Chief Executive of SSE plc with effect from 1 July 2013 in succession to Ian Marchant, who has decided to step down after 10 years in the job.  Gregor Alexander, Finance Director, will have an expanded role in supporting and deputising for the Chief Executive in the running and operations of the SSE group.

The Energy Bill

The UK government published its Energy Bill and a number of documents relating to electricity market reform in Great Britain on 29 November.  The Bill largely consists of enabling powers and the detail of the reform will be determined through secondary legislation, which will be drafted and debated later in 2013.  SSE's principal focus is to encourage legislators to ensure that the proposed Contract for Difference Feed-in Tariff for electricity from low carbon sources is accompanied by counterparty arrangements and a payment model that are workable and do not have adverse financial consequences for electricity suppliers and their customers.

At the same time, the ongoing uncertainty with regard to other important aspects of electricity market reform, such as the proposed market for electricity generation capacity, is continuing to have an impact on investment decision-making.  For example, SSE issued an invitation to tender for the construction of its planned 470MW combined cycle gas turbine (CCGT) plant at Abernedd in 2011 but now does not expect to take an investment decision on Abernedd until the second half of 2013 at the earliest.

Financial outlook
SSE will publish its results for the financial year to 31 March 2013 on 22 May 2013.  It expects that it will deliver:

·     an increase of at least 2% more than RPI inflation in the full-year dividend to around 84 pence; and

·     an increase of around 4% to 5% (nominal) in adjusted profit before tax.

The actual level of adjusted profit before tax achieved will be influenced by the factors set out in the Adjusted Profit Before Tax section of SSE's six-month financial report in November 2012.

SSE expects to report that all three of its segments - Networks, Retail and Wholesale - have been profitable during 2012/13.  Within the Retail segment, SSE expects that its profit margin (ie adjusted operating profit as a percentage of revenue) in Energy Supply will be higher than the 3.5% achieved in 2011/12 and closer to its expected average of around 5%.

As stated in its Annual Report 2012, its Notification of Close Period in September 2012 and its six-month financial report in November 2012, SSE's target for 2013/14 onwards is to deliver annual dividend increases which are greater than RPI inflation while maintaining dividend cover over the medium term within a range around 1.5 times. 

Ian Marchant, Chief Executive of SSE, said:

"This financial year has been characterised by continuing economic uncertainty and challenging energy market conditions which have affected energy customers and electricity producers alike.  SSE's balanced model of market-based and economically-regulated businesses and strategy of focusing on operations and investments in these businesses is again proving to be robust.  The overall performance of the company has been good in 2012/13 and I'm pleased that SSE is on course to deliver further growth in the dividend and an encouraging increase in adjusted profit before tax in this financial year."

Enquires

Sally Fairbairn - Head of Investor Relations                 [phone]

Brian Lironi - Head of Media                                            [phone]

 

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