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Chairman says SSE not part of problem as profits hit £1.6bn

SSE chairman Lord Smith of Kelvin has insisted that the Perth-based energy giant is "not part of the problem" as it posted a better-than-expected 9.6 per cent increase in 2014 annual adjusted pre-tax profit, following a year in which power companies have been lambasted for high tariffs.

The owner of Scottish Hydro Electric said it had delivered 15 successive increases in adjusted pre-tax profits since it was formed in the 1998/99 financial year.

The group, a member of Britain's 'Big Six' energy suppliers which have come under fire for increasing tariffs, reported profits of £1.6 billion, ahead of the £1.5bn expected by an average of 17 analysts, according to Thomson Reuters data.

Lord Smith said: "The issues facing the energy sector are very challenging.

"Nevertheless, customers, investors, regulators, politicians and SSE all want the same thing: an energy market that works for customers, and is trusted and seen to do so.

"We believe SSE is not part of the problem but part of the solution to meeting the energy needs of customers in Great Britain and Ireland."

In an effort to head off criticism SSE said in March it would freeze its energy tariffs until January 2016.

Britain's second largest energy supplier said yesterday it "would like to extend its price freeze beyond 2016, or even cut prices if further costs can be taken out of energy".

The company claimed that shifting the cost of green policies from power companies to taxation would allow it to reduce bills by around £100.

"Recouping the cost through energy bills takes no account of an individual's ability to pay and is therefore socially regressive," it said.

The company announced a 2.9 per cent rise in its final dividend to 60.7p, to be paid in September. This sent its full-year pay-out up 3 per cent to 86.7p per share.

Lord Smith said: "We are committed to giving investors a fair return through an annual dividend that at least keeps pace with inflation."

Retail operating profit at SSE was down 28.6 per cent to £292 million for the year, and the firm said it had lost 370,000 customers in Britain and Ireland. It also saw consumption fall due to mild winter weather. The company said its profit margin of 2.9p in the pound on energy supply for the year was well below the level of 5 per cent which the company argues is a "fair amount to earn from supplying efficiently energy to customers".

In contrast, the company's electricity transmission operating profit rose by nearly half due to a major increase in investment which Lord Smith said would continue with a net investment of around £5.5bn over four years in the network.

SSE warned that it would have to change its investment plans in the event that Scotland votes for independence in September.

"SSE's capital and investment programme always takes account of legislative, regulatory and market change and its capital expenditure plans would be adapted to reflect market or sector changes arising from a 'Yes' outcome in the referendum," it said.

The company also warned that independence could bring currency complications.

"This would require SSE to take steps to ensure that its financial and other contracts continue to reflect the underlying currency denomination of its assets and cashflows," it said.

While it said a "yes" vote "represents increased legislative and regulatory risk" for SSE, it insisted it remains "strictly neutral" in the constitutional debate.

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