SSE post slight profit rise as networks and generation outperform supply segment

SSE emphasised the benefits of a mix of market and regulated businesses as it announced a rise in pre-tax profits in its network and wholesale businesses and a reduction for its retail business - new reporting segments for the business as a whole.

In the year to end of March 2012 the overall operating profit was up 2 per cent to and the company confirmed an increased dividend and plans for further dividend growth this year.

In the retail business operating profit fell 19.7 per cent to £321.6 million, while wholesale profit rose by 6.4 per cent to £607.9 million and the networks division, which includes transmission in Scotland and electricity and gas networks across Great Britain, rose by 6 per cent to £737.1 million.

In the retail business SSE lost around 1 per cent of customers, finishing the year with 9.55 million customers - and it announced that it would acquire 130,000 more gas customers in Northern Ireland from Phoenix (see separate story). In the year to March gas consumption fell by 19 per cent and electricity consumption fell by 6.9 per cent.

Alistair Phillips-Davies, generation and supply director, said the company aims to maintain a profit margin of around 5 per cent in the supply business, but this year margin was just over 3 per cent. He said the company had made provision of £60 million to cover the costs of doorstep selling and metering issues.

Phillips-Davies complained of Ofgem "seeming to turn a blind eye to unfair pricing by our customers," and said the regulator's Retail Market Review had been "overtaken by events" and he hoped that the RMR would move from a "heavy " version to a "light" option as suggested by Ofgem, and could become irrelevant.

In the wholesale business renewable energy generation rose by 73 per cent, partly due to favourable weather conditions and partly because of an increase in wind capacity. The company said it hoped to bring the Glendoe hydro project back on line in the summer.

Gas prices were up 20 per cent over the year, SSE said, and spark spreads had fallen by 75 per cent and the company had carried out work at its Keady and Medway gas stations so they could be operated with more flexibility.

In the networks division, which represents the largest slice of SSE's business at 44 per cent, SSE highlighted network extensions at both distribution and transmission level - notably the start of construction of the controversial Beaully to Denny transmission line, where pylons stared going up early this year.

The company also noted that it had competed six new inset water supply appointments, and Gregor Alexander, finance director for the network sector, said "the ability of this business to offer a genuine multi utility service to customers will stand it in good stead."

Source: Utility Week

16th May, 2012

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