Markets

SSE drops as Scottish wind farm delay damps bumper profit

Company maintains its full year guidance

SSE said its Seagreen offshore wind farm would be delayed

Wed Nov 16 2022 - 12:21

SSE shares edged down after the UK power generator said its major wind farm development would be delayed by months until the summer.

SSE fell as much as 2.5 per cent after the announcement of the delay to the Seagreen development, which is set to be the world’s largest offshore wind farm. A lull in the firm’s renewables unit from adverse weather and delays “highlight persistent headwinds in offshore development,” said Bloomberg Intelligence analyst Patricio Alvarez.

The company still posted an expected set of bumper profits from ballooning energy prices, just a day before the government is set to expand a windfall tax on the industry.

The UK power generator’s profits only heighten the spotlight on utilities seen as capitalising on higher wholesale prices after Russia’s invasion of Ukraine. British chancellor Jeremy Hunt is considering a 40 per cent windfall tax on their “excess returns” as part of a sprawling package of tariff increases and spending cuts due to be announced Thursday.

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SSE’s adjusted pretax profit jumped 221 per cent to £559 million (€667 million) in the half-year ending September 30th, largely driven by higher revenue from its gas-fired plants, according to a statement.

“We’ve always been clear we’re very happy to pay our fair share of tax, Alistair Phillips-Davies, SSE’s chief executive officer, said on a media call, adding that the European Union’s revenue limit of €180 per megawatt-hour was reasonable. “I think Europe’s set a sensible cap.”

Despite the company’s growing focus on green power, a large part of its profit growth was derived from its gas-fired generation. It was also hit by a drop in earnings from its renewables business, caused by lower than expected hydropower and wind volumes, forcing it to buy power at higher prices to meet its contracts.

Earnings per share were 42 pence, compared with 11 pence a year earlier. The company maintained its full-year guidance of at least £1.20.

Delays in the construction of Seagreen, which is now expected to be operational in the summer instead of April, cost the company £57 million because it needed to buy back hedged power. “We’re in the lap of the weather gods,” Phillips-Davies said, adding he wasn’t yet sure which month the project will be completed.

SSE is still trying to sell a 25 per cent stake in its power transmission assets to raise cash to build more renewables generation as it focuses on wind and hydropower in Scotland. Phillips-Davies said he hoped to see an announcement by the end of the year. – Bloomberg

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