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SSE’s generation business took a severe hit over the first half of the year due to lower temperature-led demand and weak wholesale prices, with operating profits falling over 85 per cent lower than in H1 2013.
The energy company said in its first half financial results on Wednesday that operating profits from the generation side of its business fell to £11.8 million, down 86.3 per cent from H1 2013, due to lower electricity output.
Generation from the company’s thermal generation fleet was lower due to weak demand over the UK’s historically mild winter months this year, while its onshore wind assets reduced output by 22 per cent due to low wind speeds, the company said.
Mild temperatures also led to lower gas production over the summer due to weak price signals from the wholesale gas market. SSE said its operating profit for gas production slumped over 80 per cent compared to the first half of last year to £13.3 million.
Market prices for gas were at four year lows over the summer because gas storage levels were left full following the mild winter, dampening the usual summer demand for storage injections.
SSE said its gas storage business saw operating profits fall by 69.2 per cent to just £1.6 million as a result.
Overall the operating profit from the wholesale side of its business – including generation, production and storage – fell 83.4 per cent year-on-year to £26.7 million.
“The cumulative impact of a challenging business environment and persistently low production and consumption of energy mean SSE now believes adjusted earnings per share in 2014/15 will be at the lower end of the range set out in March 2014 and therefore be around the same level achieved in 2013/14,” said SSE’s chairman Lord Smith of Kelvin alongside the results.
The company still managed to report adjusted operating profits 4.6 per cent higher than H1 2013 at £370.3 million due to improved financial performance of its networks and supply arms.
The operating profits of its networks business rose to £458.4 million, up 4.7 per cent on the year, while its retail operating profit reached £37.3 million in H1 2014, compared with an operating loss of £71.4 million at the same time last year.
SSE said it expects market conditions to remain challenging as temperatures have remained mild into the second half of the year.
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