SSE faces a ‘challenging’ business environment, says chief exec

SSE continues to face a challenging business environment as falling customer numbers and lower overall consumption is compounded by its limited capacity to pass on falling wholesale costs through bills.

In an interim trading statement SSE chief executive Alistair Phillips-Davies said the “challenging business environment we identified at the start of this financial year is likely to continue into the new financial year”.

The company saw its wholesale generation output fall over the past nine months, particularly from coal-fired power which dropped to 5.1TWh compared to 11.3TWh for the same period the year before.

This was partly driven by lower average household electricity consumption which was down 5.6 per cent and gas consumption down 15.8 per cent over the past nine months while outright customer numbers dropped from 9.10 million on 31 March 2014 to 8.71 million.

In addition the company’s decision to react to Labour’s price freeze threats with a fixed deal forced the company to buy much of its energy before the heavy wholesale losses of recent months, locking the company into higher costs.

“SSE is at a competitive disadvantage versus the peer group due to its decision to lock in its commodity exposure for 2014 and 2015 early to accommodate its price freeze pledge. Thus it is less able to benefit than its peers from recent weakness in commodities,” said analysts at RBC Capital.

While rival suppliers Eon, Scottish Power and British Gas have pledged to cut prices before the end of February, SSE will only bring its price cut into effect in April.

But Phillips-Davies said the company would continue “with a clear focus on our value programme to make sure SSE is well-positioned for the long term”.

In March 2014, SSE announced a value programme to secure operational efficiencies and to complete asset and business disposals, with the overall objective of streamlining and simplifying the business. Since then the company has completed deals to dispose of assets with a total value of £440 million, and realized 90 per cent of the £100 million target on annual savings in overheads, it said.

SSE added that it will set out the next steps in its value programme by its full year results presentation in May.