SSE hikes profit expectations powered by oil and gas prices
SSE has raised its profits forecasts from 120p to 150p per share for the full-year, after soaring oil and gas prices increased its earnings expectations.
It attributed the upgrade to “increased certainty from strong operational performance” and its diverse business mix which “continues to create value.”
Shares in the energy specialist were up 2.85 per cent at close of play on Friday following the upgrade.
Following the completion of a minority stake sale of SSEN Transmission in last November, the net debt to EBITDA ratio is also anticipated to be well below the target 4.5 times for this financial year.
Energy producers are reaping the rewards from sky-high energy prices after Russia’s invasion of Ukraine last year – which climbed to a record high of £8.75 per therm last August.
The FTSE 100-listed power giant owns wind farms, hydroelectric power assets and power stations in the UK alongside network infrastructure.
However, the chief driver of its earnings upgrade was the performance of its fossil fuel assets and storage.
The company owns nearly two-fifths of the UK’s onshore gas storage, mostly held in underground caverns in Yorkshire.
It now intends to recommend a full-year dividend of 85.7p a share for its financial year in March, which will be cut next year to 60p to a wide-ranging investment plan.
This includes a record outlay of more than £2.5bn this year “with clear visibility for further investment opportunities that support the transition to net zero”.
Renewables suffer tax headwinds
SSE is both extending its renewables ambitions overseas alongside its domestic expansion into hydrogen, carbon capture, and hydroelectric power.
This includes working on the world’s largest offshore wind farm at Dogger Bank – off the coast of Yorkshire.
Nevertheless, output from renewables such as onshore and offshore wind farms declined slightly following calmer weather conditions over the winter.
Energy producers also now face the Electricity Generator Levy – which both targets carbon generators and charges a levy on legacy low-carbon electricity generators under long-standing renewable obligation contracts (which are tied to the price of gas).
Sales above £75 per megawatt-hour are viable for a 45 per cent levy.
Earlier this month, SSE urged the Government to include investment incentives in the new levy on electricity generators to avoid deterring investment in renewable energy.
A spokesperson told City A.M.: “Investing in low carbon infrastructure is crucial to building a cheaper, cleaner and more secure homegrown energy system here in the UK. The fact that oil and gas companies have incentives that are not available to renewable producers simply doesn’t make sense.
“We all know the way to solve the energy crisis is to encourage investment in low carbon energy sources and the electricity infrastructure that supports them.”