SSE has pledged to reinvest any ‘extra’ profits from soaring wholesale electricity prices into the construction of new UK energy assets as it expects its profits to rise by more than 25% This year.
Gas storage facilities and thermal power plants at energy company FTSE 100 – which support the grid when intermittent generation such as wind and solar are not running – have continued to perform well this year, helping to mitigate a drop in the production of SSE’s renewable energy assets due to unfavorable weather conditions. Renewable generation in the 12 months to September 22 was 13% lower than the company had expected.
SSE said on Tuesday it expects to report adjusted earnings per share of at least 40p for the half when it reports interim results in November. It forecast EPS of at least 120p for the full year, although several analysts predict an even better result for the full 12 months. SSE promised to update the market on its full-year expectations later this winter.
Last year the company reported annual EPS of 95.4p, translating into pre-tax profits of over £1.1bn. Investec analyst Martin Young predicts adjusted EPS this year will reach 138p, which would mean profits of almost £1.7bn.
SSE and other power companies profiting from the extraordinary volatility in wholesale power markets are in the crosshairs of the opposition Labor Party and others who believe they should be subjected to a exceptional tax.
Prime Minister Liz Truss has so far insisted she opposes windfall taxes, although his administration maintained an energy profit tax imposed on North Sea oil and gas producers by former Chancellor Rishi Sunak in May that is expected to raise $7.7 billion. pounds this year.
SSE, which has battled windfall tax threats, said it was already investing at “record levels” in new energy infrastructure such as offshore wind farms.
Any “additional profit” it may generate due to wholesale market volatility, triggered by the war in Ukraine, “will be reinvested in projects that will provide long-term solutions that will help reduce the UK’s exposure. United with volatility in international gas prices,” the company said.
SSE is part of a group of electricity producers who are in talks with the UK government about new fixed price contracts for their production, at rates lower than the levels in effect on the wholesale market.
UK ministers hope that by persuading nuclear and renewables operators to sign the new deals, they can drive down electricity prices for households and businesses over the next few years. The negotiations have drawn criticism from Labor and some energy experts who believe power companies could lock in prices that will end up being higher over the full 15 years of the contracts on offer.
People familiar with the discussions also warn that most power producers have already sold their production for this year and a significant part of their production for next year. Unwinding these hedging agreements would be extremely costly and complicated.
If the new 15-year contracts only cover unhedged production, they are likely to have little impact on prices over the next few years, the sources said.