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SSE set for huge profit jump after hiking energy bills
SSE set for huge profit jump after hiking energy bills
(about 5 hours later)
Energy giant SSE is on track to make a profit of £1.54 billion this year two months after it announced a sharp hike in prices.
Big Six energy supplier SSE has admitted that its customers have been leaving in droves after the hike in household price last year.
The news is likely to spark fresh anger following Labour calls for a cap on household gas and electricity bills as incomes continue to be squeezed.
SSE said in a trading statement that it lost 250,000 accounts in the final nine months of 2013, with 190,000 leaving between October and December. Customers also used 4.3 per cent less electricity in the nine months and 9.5 per cent less gas.
SSE, which trades as Southern Electric, Swalec and Scottish Hydro, raised tariffs by an average of 8.2 per cent from November, blaming Government green levies as well as rising network costs and wholesale energy prices.
The company was the first of the Big Six suppliers to increase prices, announcing in October it was raising bills by 8.2 per cent.
Bills will be cut by 3.5 per cent for all of the group's nine million residential customers from March 24 after the group passed on savings from the Government's green levy shake-up but it still means an overall above-inflation rise for hard-pressed households.
However, SSE said it still expects profits to grow by about 8.8 per cent to £1.54 billion in the year to March 31.
In a trading update, SSE's chief executive Alistair Phillips-Davies said that despite the "difficult business environment", it was encouraging that the group was on course to deliver more profits and cash for shareholders.
An SSE spokesman said: “The energy market is a competitive market and this shows that if prices are not competitive, customers will switch to other suppliers. For a short time SSE was the first energy supplier to increase prices and customers were lost as a result.”
It said its full-year dividend would be up by 3 per cent and its adjusted profit before tax for the year ending on March 31 was likely to rise in line with market expectations to £1.54 billion - an increase of 8.8 per cent on 2012/13.
However, since then other suppliers have put their prices up by more than SSE and customers are switching back, the spokesman added.
This was despite the number of electricity and gas customer accounts in Britain and Ireland falling from 9.47 million to 9.22 million, while average consumption of electricity in Britain fell by 4.3 per cent and gas by 9.5 per cent - when comparing the nine months to the end of December last year to 2012.
SSE said the expected profit increase should allow the company to increase its dividend by 3% this year, an announcement that is likely to fuel anger at rising energy bills.
SSE also said there was uncertainty over the future of its investment programme, with the prospects for new power generation assets in Britain "not encouraging". It has argued it needs to make money to fund such projects.
The spokesman denied the company was profiteering, pointing out that the group’s retail division was loss-making for the first half of 2013, before the latest increase kicked in. During this period, however, SSE’s group profit was propped up by healthy earnings from its energy generation business.
The group said the failure of two offshore wind farm projects it had a stake in to be chosen for a Government investment short-list was disappointing and that it was reviewing its offshore portfolio.
Shares in SSE, which ended last year with 9.22 million customers across the UK and Ireland, increased by 7p to 1,324p.
This added to uncertainty about its investment programme in the five years from 2015, which SSE said was likely to be lower than the £1.5 billion - £1.7 billion range invested annually since 2010.
SSE was also one of the last of the Big Six to pass on a reduction in prices after an agreement with the Government to reduce the amount of green levies on bills.
The group's statement also addressed the question of Scottish independence, saying that while it did not have a view on the matter, it reiterated that the uncertainty over the future "increased legislative and regulatory risk".
The firm has promised a 3.5 per cent reduction, which will come into effect from late March, and said today that it planned to cap energy prices for around a year after that.
Meanwhile, the company said it restored electricity supplies to 130,000 homes following storms and flooding before Christmas.
SSE chief executive Alistair Phillips-Davies said: “I am very encouraged that this is a financial year in which the concerns of bill-payers have been put at the heart of the debate about how to meet the country’s energy needs.”
Mr Phillips-Davies said: "Despite what is clearly a difficult business environment, the overall performance of the company has been solid in 2013/14 and the efforts of employees, shown recently in the response to the Christmas week storms, have been excellent.
"It is encouraging that SSE is on course to deliver real growth in the dividend and increases in adjusted earnings per share and adjusted profit before tax."
Mr Phillips-Davies said the Government's decision last month to remove some of the costs of its green policies from energy bills was "an important step in the right direction".
But he said more needed to be done "to shift the full cost burden of environmental and social policies from the energy bill to the taxpayer".
SSE said a shake-up at the top of the company hierarchy will see its management board replaced by a slimmed-down six-strong executive committee.
