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Energy giant predicts profit boost

Thermostat control with pound sign24/1/14

By Ian Barnsley

One of the Big Six UK energy suppliers claims it is on track to achieve £1.54 billion in profits this financial year after a big rise in tariffs in November.

SSE's announcement is expected to anger many of its customers who will have to pay much more for their power.

Two months ago SSE, which incorporates the Southern Electric, Swalec and Scottish Hydro businesses, lifted its prices by 8.2 per cent.

It said the government's green levies and rising network and wholesale energy costs were to blame for the hike.

Green levy reforms

It now says it will pass on the savings from the government's green levy reforms to its nine million customers with a 3.5 per cent cut in the price rise from March 24 this year.

However, the increase will still be above the rate of inflation for struggling families.

Despite the tricky business environment, SSE chief executive Alistair Phillips-Davies is pleased that the company will be able to share the profits with its shareholders.

He said its full-year dividend would increase by 3 per cent and based on market expectations SSE would see profits reach £1.54 billion by the end of March, a figure 8.8 per cent higher than the profits it made in the 2012/13 financial year.

This is despite the fact SSE is serving fewer customers in the UK and Ireland, a drop from 9.47 million in 2012/13 to 9.22 million in 2013/14.

It used 4.3 per cent and 9.5 per cent less electricity and gas respectively from April to December last year compared to the same period in 2012.

Power generation projects

The company reports uncertainty over planned investments and says it needs to make profit to fund new power generation projects as the outlook for such schemes is "not encouraging" at the present time.

It is rethinking its offshore investments after two wind farm schemes failed to make a shortlist for government funding.

In each of the next few years SSE expects to invest less than the £1.5bn-£1.7bn it has spent every year since 2010.

Although it doesn't have a specific view on the question of Scottish independence, SSE claims the uncertainty over whether the country will vote yes or no has "increased legislative and regulatory risk".

"Despite what is clearly a difficult business environment, the overall performance of the company has been solid in 2013/14 and the efforts of employees, shown recently in the response to the Christmas week storms, have been excellent," Mr Phillips-Davies said.

"It is encouraging that SSE is on course to deliver real growth in the dividend and increases in adjusted earnings per share and adjusted profit before tax."

The company has also announced that it had to restore power to 130,000 homes following the severe storms and flooding in the run-up to Christmas.

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