Weather hits SSE’s operating profits by £80 million in Q1

Warm weather “negatively impacted” SSE’s operating profits by around £80 million in the first quarter of 2018.

The company blamed the weather for a low output from renewable sources in a trading update, ahead of its annual general meeting (AGM) later today (19 July).

Shareholders will be asked to back the proposed merger of the company’s retail arm with Npower at a general meeting after the AGM.

SSE’s adjusted operating profit has been negatively impacted by around £80 million, compared with its plan, which may impact its full year results – dependent on factors such as wholesale prices, the company said.

Hydro output was higher than in the same period in 2017 due to increased levels of snow melt but output was 20 per cent lower than anticipated.

Poorer than average wind conditions resulted in output from both onshore and offshore windfarms being around 15 per cent lower than expected.

Warmer weather also had an impact on profits, with temperatures in the UK across the period 1.5°C warmer than the 30-year average which led to average gas demand being around 10 per cent lower than expected. In addition to dry, still and warm weather, the financial year so far has also been “characterised” by persistently high gas prices.

The update highlights these factors have resulted in a higher cost of energy, lower than expected output of electricity from renewable sources and lower volumes of energy being consumed.

In May the company announced plans to raise its gas and electricity prices for dual fuel customers by an average of 6.7 per cent due to growing wholesale and policy costs.

SSE chief executive Alistair Phillips-Davies, said: “This new financial year has so far been characterised by lower than expected output of renewable energy and persistently high gas prices, but looking ahead, we are very focused on fulfilling our obligations to energy customers and delivering on our key priorities.

“Those priorities include successful delivery of our plans to invest around £1.7 billion in this financial year, and we are pleased with the progress of key projects, including the installation of the first two turbines at the Beatrice offshore windfarm.

“Investment of this kind supports our strategic goal of creating value in a sustainable way, including remunerating shareholders for their investment, and we are strongly committed to delivering the five-year dividend plan we set out in May.”

SSE is set to invest £6 billion in projects across the five years to March 2023.

Beatrice offshore windfarm has had all 84 turbine jacket support structures installed as well as two turbines. This project will achieve first power generation this month and remains on track for completion in 2019.

Meanwhile the Stronelairg onshore windfarm also remains on course for completion next year.

SSE will hold its AGM in Perth this afternoon, after which it is scheduled to vote on the proposed merger with fellow big six operator, Npower.

During the meeting, shareholders will be asked to approve:

• the declaration of a special dividend (in kind in the form of shares in the new company) to give effect to the demerger; and
• the waiver of the obligation on Innogy, which owns Npower Group Limited, to make a general offer for all of the issued shares in the new company on completion (under Rule 9.1 of the City Code on Takeovers and Mergers).

Chairman Richard Gillingwater has previously urged shareholders to vote through the deal.

SSE said the transaction “remains on course” for completion in this financial year, subject to the results of the resolutions and regulatory approval.