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SSE profit surges by 38% after cold spell in spring

SCOTTISH energy giant SSE anounced a 38% surge in first half profits that owed much to an improved performance by its energy supply arm, which controversially hiked domestic gas and electricity prices by an average 9% in August.

CLIMBING AHEAD: SSE's growth has helped it to fund £700m of capital investment in the past six months.

The Perth-based company made an adjusted pre-tax profit of £397.5 million in the six months to September compared with £287.4m in the same period last time, helped by a big increase in gas consumption during a chillier than expected spring.

The owner of Scottish Hydro Electric, SSE raised the interim dividend by 5% to 25.2p per share, from 24p last time. It is targeting a full-year increase of at least 2% more than RPI inflation, to around 84p, for 2012/13 and inflation-beating annual increases in the following years.

The sharp rise in profits stoked controversy about the above-inflation price increases imposed recently by SSE, which came into effect on October 15.

However, its chairman Lord Smith said: "Energy market conditions remain challenging. The prices achieved for generating electricity have been weak, and higher gas and non-energy costs unfortunately had to be reflected in the increase in household energy prices which SSE implemented."

Noting the Energy Supply business achieved a profit margin of 1.5%, Lord Smith added: "Profit and dividend allow SSE to employ people, pay tax, provide services that customers need, make investments ... while providing an income return that shareholders like pension funds need."

SSE moved to reduce its reliance on wholesale gas markets by increasing its holding in the Apollo, Minerva and Mercury fields in the southern North Sea to 50%, in a $52.75m (£33m) deal with Perenco.

It is "proactively seeking" more opportunities in the sector.

Following reports of alleged price rigging in wholesale gas markets by unidentified parties, SSE said it is entirely confident its Energy Porfolio Management team operates in a fair and legitimate way.

SSE will share all "required and relevant" information with the appropriate bodies.

Chief executive Ian Marchant said SSE's growth helped it fund £700m of capital investment in the past six months, with plans for around £1.6 billion for the year.

He noted: "We have completed a lot of big projects at wind farms like Clyde and Greater Gabbard, and brought the Glendoe hydro scheme back in to service."

The decision-making process has been complicated by uncertainty about the economic outlook and regulatory change.

SSE cautioned: "The economic outlook for the UK and Ireland in 2012/13 continues to be uncertain."

It added: "There is particular uncertainty about the electricity generation market in Great Britain."

In February SSE said the forthcoming referenduM on independence in Scotland increases the risk of regulatory and legislative changes affecting the industry in Scotland, which it will have to factor into decision making.

It says questions of nationhood are matters for voters.

SSE said the increase in first half profit before tax, exceptionals and accounting changes is "mainly attributable to a return to profitability in Energy Supply and a 19.3% increase in operating profit in (transmission) Networks".

Household gas consumption increased 27.9% annually in Great Britain during the first half following below average temperatures.

SSE lost 115,000 customer accounts. It had 8.81m customer accounts in Great Britain at 30 September and 0.79m in Ireland.

Shares in SSE closed up 17p at 1400p.

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