SSE profits stifled by poor weather as renewables output slumps

SSE has maintained profit expectations for the year despite a double-digit slump in its renewables performance, as poor weather hampered output.

The FTSE 100 power generator and network operator’s renewables output in the first three quarters of its financial year was around 15 per cent below expectations on the back of ‘mixed weather’, short-term plant outages and the ‘rephasing of flexible hydro output’.

SSE told shareholders on Thursday it is still on track to achieve adjusted earnings per share of ‘more than 150p’ but with a ‘narrower range of probable financial outcomes’.

However, it said full-year performance is dependent on factors like plant availability, supportive market conditions and ‘normal’ weather over the last quarter, with January having continued to offer up ‘mixed’ weather conditions.

Poor weather has also impacted turbine installation on Dogger Bank A , which is the world’s largest wind farm and partly owned by SSE

Total SSE renewables output for the first nine months of the year was 7,336 Gigawatt hours (GWh), which is still up from 7,065GWh the prior year, as its offshore wind and pumped storage operations offset a decline in onshore wind and conventional hydro.

The poor weather has also impacted turbine installation on Dogger Bank A, which is part of the world’s largest wind farm and partly owned by SSE.

It said: ‘Following notification of further vessel unavailability over the coming weeks there is an increasing possibility that full operations will not be achieved until 2025, although this is not expected to materially change project returns.

‘The business is working closely with its supply chain partners to improve current turbine installation rates, with a further update on progress to be provided in May with publication of FY24 results.’

The renewable energy sector has also been battling sharp cost increases and supply chain issues hampering wind turbine output, with major players in the sector, including BP and Orsted, recently reporting multi-million pound write-downs, huge losses and long delays.

In November, SSE raised capital investment expectations for its net zero programme by around 14 per cent over the five years after half-year profits beat forecasts.

SSE boosted its capital investment outlook on its Net Zero Acceleration Programme Plus scheme to £20.5billion, up from £18billion earmarked earlier.

SSE renewables output was higher year-on-year but lower than expected 

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said renewables output issues are unlikely to derail SSE’s green transition.

He added: ‘SSE’s transition towards becoming a renewable energy powerhouse is continuing at pace.

‘The group’s five-year investment budget still stands at a lofty £20.5billion, which is more than its current market value. Around 90 per cent of this budget’s been earmarked to build out its electricity networks and renewables infrastructure, turbo-charging the move towards a greener future. ‘

Elsewhere, the group also reported weaker than expected performance in its thermal division as a result of lower spark spreads – the difference between wholesale electricity prices and cost of production – and market volatility.

But the group also praised an ‘increasingly supportive police environment, with SEE highlighting ‘progress in developing the routes to market’ for carbon capture and storage, hydrogen and ‘long duration energy storage projects’.

Finance chief Barry O’Regan said: ‘The strength of our balanced business mix and the growth opportunity it provides is aligned with a policy environment which increasingly recognises the essential role renewables, electricity networks and flexible power will play in the energy system of the future.

‘Our long-term strategy remains unchanged and will deliver sustainable value for shareholders and society.’

SSE shares were down 2.1 per cent to 1,618.5p in early trading, bringing 2024 losses so far to 11.9 per cent. 

Commenting on SSE’s performance, Quilter Cheviot equity research analyst Tom Gilbey said: ‘SSE has reaffirmed its confidence in its financial performance and growth prospects, despite facing some headwinds in its renewable and thermal businesses.

‘Pleasingly, the company has welcomed the supportive policy environment in the UK, which could enable it to pursue more opportunities in emerging technologies such as CCS, hydrogen and energy storage.

‘SSE’s valuation reflects its attractive dividend yield and its integrated business model, which provides resilience and diversification. We believe SSE is well-positioned to capitalise on the energy transition and deliver long-term value for its stakeholders.’

This post first appeared on Dailymail.co.uk