Profits slide at Scottish Power after losing 200,000 customers

Scottish Power profits have dipped after its retail arm saw its earnings halved during 2017, partly due to the loss of around 200,000 customers.

Earnings before interest, tax, depreciation and amortisation (EBITDA) from across its networks, renewables and generation and supply businesses declined by more than 3 per cent to £1,215 million.

The generation and supply division posted EBITDA of £121.9 million – a fall of more than 49 per cent when compared to 2016.

Supply earnings dropped nearly 52 per cent to £98.5 million after the number of customer accounts fell by 3.7 per cent from 5.3 million to 5.1 million.

Gas accounts were down roughly 120,000 (3.8 per cent) at 3.07 million, whilst electricity accounts decreased by around 100,000 (4.7 per cent) to 2.03 million. By the end of the year, Scottish Power had installed more than 738,000 smart meters.

Profits were also impacted by higher non-energy costs and warmer weather.

Earnings from generation fell by more than 36 per cent to £23.4 million, mainly due to a 28 per cent reduction in output following the closure of the Longannet coal-fired power station in 2016.

SP Energy Networks reported EBITDA of £776.6 million. The figure was down nearly 3 per cent year-on-year due to the timing of investments. The company invested £617 million across its distribution and transmission networks during 2017.

The results were saved by a strong performance from Scottish Power Renewables which grew its EBITDA by almost 45 per cent to £316.1 million.

Renewable output swelled by more than 32 per cent to 4,880GWh. Onshore wind production increased by 42 per cent to 3,358 GWh and offshore wind production  by 13 per cent to 820GWh. Hydroelectric output was up 19 per cent at 701GWh.

The company completed a £650 million two-year programme to construct eight new onshore wind farms in Scotland in 2017, helping it to reach a milestone of 2GW of wind capacity in the UK.

Scottish Power chief corporate officer Keith Anderson said: “Completing our £650 million investment in UK onshore wind in 2017 led to a good performance from the renewables business, delivering a significant increase in green electricity production.

“We now have more than 2GW of wind power capacity, and the £2.5 billion East Anglia One offshore windfarm is well in to construction. Over £600 million was also invested in to our networks business last year, as we continue to deliver smart and efficient grids capable of supporting the UK’s future energy needs.

“As anticipated, generation and supply continued to face challenges, predominantly in light of increasing input costs, reduced demand. challenging market conditions and political uncertainty.”

Parent company Iberdrola saw its revenues rise by nearly 9 per cent to roughly €31.3 billion. EBIDTA dropped by close to 8 per cent to around €7.3 billion, although net profit grew by almost 4 per cent to €2.8 billion. The Spanish firm is aiming to increase EBITDA to between €11.5 billion and €12 billion by 2022.

Chairman of Iberdrola and Scottish Power, Ignacio Galan, said: “Despite recent political and regulatory uncertainty, the UK remains a core investment destination for our company.

“Scottish Power will deliver around €6.1 billion of investment in green and smart infrastructure over the next five years. We will focus on increasing our renewable energy capacity, enhanced grid networks and smart technology for customers.”

Speaking to the Financial Times earlier today, Galan raised concerns over the introduction of a price cap in the UK, claiming it is undermining investor confidence: “The noise and rumours are affecting the credibility and predictability and stability of the system. That is moving Britain from being one of the most stable countries to one of the least stable.”

He said he was completely opposed to a “fully regulated retail tariff” so long as it was clear and made a provision for defined profit margin.

Galan also warned that the end of an era of cheap money, as central banks begin to raise interest rates, could lead to Enron-style collapses of renewable developers around the world.

“Because money is so cheap, many people who have no talent in the sector have been coming with an extremely high level of leverage,” he told the paper. “With the change of the rates, there will be a clean-up of the sector.”

Galan qualified his comments by saying he was not accusing new entrants of the kinds of dodgy accounting practices seen at the Texas-based energy company but added: “Enron was highly leveraged… and they had no talent as a utility or as traders. And what happened — it disappeared.”