SSE commits to reinvest windfall profits in UK energy assets

SSE has pledged to reinvest any “extra” profits resulting from sky-high wholesale electricity prices into the construction of new UK energy assets as it forecasts an increase in yields of more than 25 per cent this year.

The FTSE 100 energy company’s gas storage facilities and thermal power plants – which support the grid when intermittent generation such as wind and solar are not operational – have continued to perform strongly this year, helping to cushion a fall in SSE’s renewable output from unfavorable weather conditions. Renewable energy for the 12 months ended Sept. 22 was 13 percent lower than the company had anticipated.

SSE said on Tuesday it expects to report adjusted earnings per share of at least 40 pence for the half-year when it releases its interim results in November. It forecasts full-year earnings per share of at least 120 pence, although several analysts are forecasting even better earnings for the full 12 months. SSE has promised to update the market on its expectations for the full year later in the winter.

The company last year reported full-year earnings per share of 95.4 pence, which translates to more than £1.1 billion in pre-tax profit. Investec analyst Martin Young is forecasting adjusted earnings per share to rise to 138 pence this year, which would mean profit of almost £1.7 billion.

SSE and other electricity companies, which are benefiting from exceptional volatility in wholesale energy markets, have been targeted by opposition Labor Party and others who believe they should be subject to an unexpected tax.

Prime Minister Liz Truss has so far insisted she is opposed to windfall taxes, despite her government maintaining an energy profits levy imposed on North Sea oil and gas producers by former Chancellor Rishi Sunak in May, which is expected to rise to 7.7 this year will bring in billions of pounds.

SSE, which has fought threats of windfall taxes, said it was already investing in new energy infrastructure, such as offshore wind farms, at “record levels”.

Any “extra profit” generated as a result of the volatility in the wholesale market caused by the war in Ukraine “will be reinvested in projects that provide long-term solutions that help reduce the UK’s exposure to volatile international gas prices.” . said the company.

SSE is among a group of electricity producers in talks with the UK Government about new fixed price contracts for their electricity at tariffs below prevailing wholesale market levels.

UK ministers hope they can bring down electricity prices for households and businesses over the next few years by convincing nuclear and renewable energy operators to sign up to the new deals. The negotiations have been criticized by Labor and some energy experts who believe energy companies could lock in prices that could be higher over the full 15 years of the proposed contracts.

Those familiar with the discussions also warn that most generators have already sold their capacity for this year and a significant portion of their production for next year. Reversing these hedging arrangements would be extremely costly and complicated.

If the new 15-year contracts only cover unsecured production, they should have little impact on pricing in the new years, the people said.

https://www.ft.com/content/b329b16f-401c-48d7-a5f8-da36d68f9de7 SSE commits to reinvest windfall profits in UK energy assets

Adam Bradshaw

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