SSE squeezes higher profits from household energy customers

Gas and electricity

Gas and electricity

The company said the full impact of a price cap could be seen only once all its features were known but that this was clearly a risk to SSE's business.

'The main attraction of SSE remains the dividend, which has grown every year since 1992, and the shares now offer a yield of 6.5 per cent.

Like the other six big energy suppliers, SSE's earnings are expected to be hit by a proposed cap on prices.

Shares fell 0.76% to 1,440.0p in morning trading.

Adjusted pre-tax profit - stripping out one-off items - rose by 2.1% to £1.55bn, boosted by its wholesale electricity generation and gas production business. Standard prices tend to be higher than fixed-rate deals, so companies with a greater proportion of customers on SVTs are able to make bigger profits through the energy cycle.

SSE on Wednesday said the amount of cash it would have to pay its dividend would be at the bottom end of the range.

Reported operating profit for the division was £313.2m - £85.7m lower than in 2016 - while on an adjusted basis the figure was £9.4m lower at £389.5m.

The group is Scotland's largest by market value and operates across three main divisions - wholesale, networks and retail, the domestic supply arm of the business. Its total energy customer accounts in Britain and Ireland fell to 8 million compared to 8.21 million a year earlier.

SSE has continued to lose customers in the past year.

SSE said it still expects to be at the lower end of its dividend cover range in the new financial year, despite securing a lower-than-anticipated clearing price in the 2017 year-ahead capacity market auction and the anticipation of lower profits from its Networks division spurred by the SGN sale. Revenue from electricity distribution will benefit from around GBP10.0 million of under-recovered revenue in the recently-ended financial year.

It said: 'SSE would however continue to caution against the unintended consequences of intervention in what is a competitive, dynamic and fast changing market.

The Big Six provider said 4.76 million of its 6.76 million United Kingdom domestic customer accounts could be affected by a cap on standard variable tariffs (SVTs).

Capital and investment expenditure was in line with SSE's expectations, reaching GBP1.73 billion, an increase from GBP1.62 billion the year before, and near SSE's guidance of GBP1.70 billion.

"In responding to such uncertainty, SSE engages constructively with governments and regulators".