Energy giant SSE has reported a surge in renewables profits and said it is on course to record a further increase as it achieves strong returns on investment in windfarms and the like.

The Perth-based firm said its renewables generating division grew operating profits by around 50% to £833 million in the year to March 31, from £562m in the preceding period, helped by a contribution from the giant Seagreen windfarm off Scotland. This became fully operational in October.

The company said renewables operating profits are expected to increase significantly in the current year. The company expects to secure higher prices for its renewables output which is set to be boosted by the start of generation at the bumper Viking windfarm in Shetland.

“When complete, Viking is expected to be the UK's most productive onshore wind farm,” the company told investors.

It said the expected start of production from Viking in summer and from the Dogger Bank development off North East England later in the year combined with a 30% increase in prices for its output are predicted to support a significant increase in operating profits in the current year.

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Chief executive Alistair Phillips-Davies said SSE has pursued a very disciplined approach to investment in renewables. However, he noted the company has benefitted from support provided by the UK Government under a range of mechanisms.

SSE boycotted the latest auction under the Contracts for Difference support programme. Generators decided the price guarantees offered by the Government did not recognise the impact of inflation and increases in interest rates on project costs.

“We’re probably going to need a mega-round next year,” said Mr Phillips-Davies. Speaking before Rishi Sunak called a general election for July 4, he said whichever Government is in power following the next UK ballot must “really push the button” in terms of CfD support to get close to the emissions reduction targets set for 2030.

Mr Phillips-Davies commented after SSE posted a pre-tax profit of £2.2bn for the latest year, in line with the preceding period.

SSE also benefited from its decision to invest in growing its networks operation.

Networks operating profits increased by 13%, to £419m from £373m.

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Mr Phillips-Davies applauded the regulator for making effective moves to encourage firms to commit the investment required to upgrade networks to link output from windfarms in places such as Shetland to the grid.

He highlighted SSE’s plans to invest in low-carbon gas-fired power generation plants such as the one planned for Peterhead. Such plants could generate ‘dispatchable power’ for use when weather conditions are unfavourable for renewables.

Mr Phillips-Davies wants the Government to move faster to help secure investment in facilities that could be used to reduce emissions associated with gas-fired plants including hydrogen production and carbon capture and storage.

SSE’s thermal generation and gas storage division saw operating profits fall to £818m, from £1.24bn. The company cited the fall in commodity prices during the latter part of the year from the peaks reached in 2022-23.

SSE said it invested a record £2.5bn in critical national infrastructure in the latest year. Investment is expected to increase to over £3bn in the current year “reflecting a ramping up of project delivery”.

The profits it generates will help fund big payouts to investors.

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SSE plans to pay a final dividend of 40p per share, taking the full year total to 60p. The dividend was rebased from 96.7p in the preceding year to support SSE’s “ongoing ambitions to accelerate investment”.

The company said: “The 2024/25 financial year is expected to see the dividend increase by between 5 - 10%, in line with a commitment to aligning future dividends with SSE's ambitious growth profile.”

Total cash dividend payments increased to £917m in the latest year, from £474m.

SSE paid £345m cash taxes in total, against £255m last time.

Operating profits in the distribution arm, which covers local supply facilities, fell to £272m in the latest year from 382m.

Shares in SSE closed up 17.5p at 1,816.5p.