SSE faced questions from shareholders on customer retention and executive pay at its annual meeting in Perth yesterday.
Chairman Richard Gillingwater, referring to the 210,000 retail customers it lost last year, said the company had done “pretty well” in terms of customer retention.
Citing a “highly competitive” market, SSE reported yesterday that a further 230,000 had switched supplier in the last quarter.
The energy giant said that it faced “a number of complex challenges”, but confirmed that it would continue to deliver dividend increases that at least match retail price index (RPI) inflation.
These challenges include proposals from the energy watchdog, Ofgem to introduce a “safeguard tariff” for vulnerable customers, and tougher price controls.
In April, Ofgem warned investors in the Big Six energy firms, to “prepare for lower returns from 2021”, when its next regulatory period begins.
Total customers in SSE’s retail division, which last year delivered 22 per cent of the group’s £1.5 billion operating profits, now total 7.77 million. The group has seen customer account numbers fall 19.5 per cent from their peak of 9.65 million in March 2011.
Defending the company from an irate shareholder who said he had “no faith in the board”, chairman Richard Gillingwater said: “We have 50 competitors, everyone is fighting for business. We think constantly about how to supply energy, our level of service, but the challenge is absolutely keeping customers loyal against the sheer strength of the competition. I think in the last year we’ve done pretty well in terms of customers of retention.”
SSE and its Big Six rivals are facing increasing competition from niche challengers who target specific customer bases.
SSE said it would actively engage with Ofgem and that it believed competition should be at the heart of the retail energy market.
“Energy companies must redouble their efforts to regain the trust of politicians and other stakeholders,” said Mr Gillingwater.
Another shareholder said the 72 per cent pay increase awarded to chief executive Alistair Philips-Davies last year was “disappointing for a company that claims to be ethical”.
He added that such increases were a “red rag” when energy companies were already contending with negative perceptions.
Mr Gillingwater said SSE had “a very effective leadership team”, adding: “The increase is steep but if you look at how they are paid, it is more conservatively than the rest of the sector or FTSE 100 [companies].”
He said that pay was linked to performance, and “after a year of difficult challenges, the executive team hit all their targets”.
The resolution on remuneration was passed with a 98.2 per cent majority.
Ahead of the meeting SSE said warmer temperatures in the period had led to a reduction in energy consumption. It also said that capital investment spend would be £1.7 billion in the year, and £6bn in the four years to March 2020, mainly in electricity networks and renewable energy. By 2020, SSE expects to generate 4.3 gigawatts of renewable energy.
Responding to a claim that the company should be pursuing nuclear energy instead of renewables, Mr Gillingwater said that risks associated with the cost of generation, and price guarantees to make it viable were “just too high”.
A final dividend of 91.3p was confirmed, ensuring SSE maintained a dividend increase at least in line with RPI inflation.
But with dividend yield now at 6.4 per cent, analysts have questioned the impact this strategy is having on cashflow.
“Unless [new wind farms] can deliver a noticeable improvement in cash flows, its policy of raising the dividend by at least the rate of RPI inflation is going to look like an ever more weighty burden,” said George Salmon, equity analyst at Hargreaves Lansdown.
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