WHILE the rest of the UK has been battered by rain, a lack of it has been blamed for a 40% plunge in hydro power generation at Scottish & Southern Energy (SSE).

According to the utility giant's latest trading update, covering the nine months to the end of December, hydro energy output has dropped from the record levels seen in 2011/12 to just below the level expected in a typical year.

An increase in output from wind power – where net capacity onshore rose from 128 megawatts (MW) to 1431MW – offset the hydro fall, meaning total generation from renewable sources was only slightly down from 5.3 terawatt hours (Twh) to 5.2Twh.

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SSE said it had exceeded 2000MW of renewable energy capacity from its estate for the first time on December 28.

Part of that included the £150 million Glendoe hydro scheme near Loch Ness – which had been closed since August 2009 after a rockfall blocked a tunnel just months after opening – as it began operating again in August.

It had produced 67 gigawatt hours of electricity by the end of December.

Meanwhile, electricity and gas customer numbers across the UK and Ireland fell from 9.55 million to 9.45 million, even after including the 130,000 people added through the acquisition of Phoenix Holdings in June.

SSE said it had lost customers due to it being the first of the big six energy suppliers to put prices up in the period but numbers have since stabilised.

In spite of those challenges, SSE said it remains on course for an increase in underlying full year pre-tax profit of between 4% and 5%.

Adjusted pre-tax profit in the 12 months to March 31, 2012, came in at £1.34 billion.

The Perth company also signalled a hike in dividend during its current financial year to around 84p per share.

Angelos Anastasiou, an analyst at Seymour Pierce, said the profit predictions were higher than the market had pencilled in.

He added: "SSE expects all three of its segments – networks, retail and wholesale – to have been profitable.

"The [trading update] is reasonably upbeat, and the profit guidance is slightly better than expected. Hence, we would expect it to be well received."

SSE said uncertainty over electricity market reform in relation to the Energy Bill going through the UK parliament was delaying investment decisions.

It highlighted the fact it invited tenders to build a gas-fired power station at Abernedd, South Wales, in 2011 but does not expect to make a decision on the site until the second half of this year at the earliest.

Ian Marchant, who will be standing down as chief executive in July, said: "This financial year has been characterised by continuing economic uncertainty and challenging energy market conditions which have affected energy customers and electricity producers alike.

"SSE's balanced model of market-based and economically-regulated businesses and strategy of focusing on operations and investments in these businesses is again proving to be robust.

"The overall performance of the company has been good in 2012/13 and I'm pleased that SSE is on course to deliver further growth in the dividend and an encouraging increase in adjusted profit before tax in this financial year."

Mr Marchant will be succeeded by current deputy chief executive Alistair Phillips-Davies while finance director Gregor Alexander will have an expanded role in the running and operations of the group.

SSE's shares ended the day up 0.21% at 1419p.