By Scott Wright

POWER firm SSE has hiked its earnings forecast by 25 per cent after benefitting from higher energy prices, as a rise in production at its gas-fired power stations offset lower-than-planned output from its wind farms in the third quarter.

The Perth-based energy giant updated expectations for adjusted earnings per share year to more than 150p from at least 120p for 2022/23, declaring the upgrade reflects the “strength and stability of its balanced mix of regulated and market-facing businesses with continuing good availability and supportive market conditions”.

The company highlighted a reduction in risk arising from recent falls in forward power and gas prices, and further clarity around the Electricity Generator Levy, noting that these factors had reduced uncertainty over the outlook. The EGL was introduced by the UK Government in December as a temporary 45 per cent charge on the “extraordinary returns” renewable and nuclear energy electricity generators have been making since wholesale prices surged following Russia’s invasion of Ukraine.

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SSE, which has interests in wind farms, power stations, network infrastructure and transmission, said its full-year outrun would be determined by market volatility that is “expected to continue in the near term, uncertainties such as plant availability, weather conditions, and the extent to which market conditions lead to further optimisation of flexible generation plant”.

It remains on course to deliver record investment of £2.5 billion this year in a range of offshore wind, UK electricity network, and thermal generation projects, as investment opportunities accelerate with the drive to net zero.

SSE contends the UK will need a range of sources of electricity generation as it makes the transition to net zero to ensure adequate supplies, safeguard energy security and respond to changes in the market.

Yesterday, it reported a rise in output from its thermal division, which includes five gas-fired power stations in the UK and Ireland.

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Strong availability across its existing fleet in the last quarter, combined with market conditions, meant electricity output from its gas-fired generation plant was 27% higher in the nine months to December 31, at 14,250 gigawatt hours, than the same period the year before. The company is investing £350 million a new 840 megawatt plant in North Lincolnshire, Keadby 2, which it expects to be the cleanest and most efficient combined cycle gas turbine plant in Europe. Commissioning is expected to start on January 22.

On renewables, SSE said output was 10% below plan in the nine months to December 31, noting that the third quarter “continued to see periods of unseasonably calm and dry weather with delays to the Seagreen project also contributing to the shortfall against plan”.

The 1,075MW Seagreen offshore wind farm project, located 27km off the Angus coast in the North Sea, is a £3 billion joint venture between SSE (49%) and TotalEnergies (51%). Work is expected to be completed this summer.

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SSE added yesterday that construction work was also continuing on the giant Dogger Bank and Viking windfarms, respectively located off the north-east of England and on Shetland.

Aarin Chiekrie, equity analyst at stockborker Hargreaves Lansdown, said: “Overall, the struggling markets appeared to like this update and the group’s valuation is now trading up around 9% over the past year. However, renewables carry an inherent risk which this latest trading update highlights – they’re not always reliable sources of energy.”

Gregor Alexander, finance director of SSE, said: “SSE is performing well in a shifting and volatile energy landscape, underlining the strength of our balanced business mix and the quality of our assets, and we are well placed to deliver a strong financial performance for the full year.

“We are responding to the cost of living and energy crises by investing record amounts and remain committed to investing additional profit we make into critical low-carbon electricity infrastructure.”

Shares in SSE closed up 33.8p, or 1.99%, at 1,735.8p.