SCOTTISH Hydroelectric owner SSE has seen profits plunge at its British household energy supply business following the loss of 570,000 customers but said it still hopes to offload the division next year.
The Perth-based energy giant revealed that the profits it made from the sale of gas and electricity to households in Great Britain fell to £84 million from £260.4m as it faced challenges on several fronts.
The total number of customer accounts for the supply of gas and electricity in Great Britain fell to 5.78 million at March 31 compared with 6.35 million at the end of the preceding year.
The third biggest supplier in the GB energy market, SSE has lost business to newcomers in recent years along with other big six players.
Other factors in the fall in profits cited by SSE included the introduction of a cap on energy prices by Ofgem in January. The regulator sparked anger in February by announcing it would increase the cap on standard variable tariffs by £117 to £1,254 a year from April 1 due to hikes in wholesale costs.
SSE suffered a big setback in December when a controversial plan to merge the retail business with npower fell apart.
The groups scrapped the plan citing the likely impact of challenging market conditions.
SSE said yesterday it has been actively progressing a range of options for the future of the retail arm including a possible sale, “alternative transaction” or separate stock market listing.
Katie Bickerstaffe will take charge of the retail division in June with a “mandate to deliver a new future for it outside the SSE group and continue progress towards a listing or new, alternative ownership by the second half of 2020”.
The task may be complicated amid uncertainty about the outlook for energy firms.
SSE noted: “The energy sector as a whole remains under significant scrutiny, including from the Labour Party, which advocates nationalisation of energy networks.”
The group wants to focus on the power generation and distribution businesses, with a strategy that will involve heavy investment in renewables projects.
Chairman Richard Gillingwater said SSE had made significant progress towards its ambition to be a leading energy company in a low-carbon world.
However, he noted: “Our financial results clearly fell well short of what we hoped to achieve at the start of the year.”
The total profit made by the core businesses that SSE plans to retain fell 38% annually, to around £0.7 billion before tax and one offs, from £1.2bn, as the company was wrong-footed by gas price movements.
The energy portfolio management arm, which helps the firm hedge against price movements, made a £285m loss against a £46m profit last time.
In September chief executive Alistair Phillips-Davies said well-intentioned decisions intended to mitigate commodity price risk through energy portfolio management would have a disappointing impact on the financial results for the year to March 31.
SSE said the EPM business is expected to lose around £115m in the current period, citing the negative impact of persistently high gas prices on SSE’s energy position.
But directors appear confident that SSE can play a part in helping address the challenge of climate change while remaining an attractive investment proposition.
Mr Gillingwater said: “We have continued to develop our core businesses of regulated energy networks and renewables; demonstrated our ability to create and unlock value from developing and operating, as well as owning, assets; and adopted clear long-term goals.”
The company recorded £1.0bn exceptional gains, with around £0.8bn attributable to the disposal of stakes in the Clyde, Stronelairg and Dunmaglass windfarms in Scotland.
Mr Phillips-Davies said the company is focused on delivering the five-year dividend plan set out in May last year.
SSE said then it expected to pay 97.5p per share dividend for the year to March 31. The dividend would be reduced to 80p for the year to March 2020, reflecting the expected exit from the retail business. It should then increase at least in line with RPI inflation in the following three periods.
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