SSE, the electricity generator and network company, has upgraded its profit forecasts to nearly £1bn for its latest financial year as soaring gas prices more than made up for disappointing renewable energy output.
The FTSE 100 company runs gas-fired power plants alongside hydroelectric and windfarms, meaning it can make up for still periods by burning more gas – albeit at the cost of increased carbon dioxide emissions.
That has allowed it to take advantage of the tight global gas market, in which prices have quadrupled, adding to the squeeze on household incomes but providing a huge surge in profits for some of the UK’s biggest energy companies.
SSE, which is based in Perth, increased its adjusted profit forecast for the financial year ending on 31 March to “at least 90p” a share, up from 83p, in a trading update published on Tuesday. That would suggest profits (excluding some one-off costs) of at least £950m. It would compare with adjusted profit after tax of £910m for the year to 31 March 2021.
Renewable energy output in the UK and Ireland from April to December was only 81% of planned levels, SSE said, because of an “exceptionally still and dry” summer. Meanwhile, energy output of 11.2 gigawatt hours (GWh) from its gas- and oil-fired plants was nearly double total renewables generation of 5.9GWh.
Gregor Alexander, the SSE finance director, said he had “renewed confidence about delivery of good financial results for the full year”.
He argued that gas-fired plants give the company “balance through a turbulent trading period” as well as the ability to give sustainable shareholder returns over the long term. The company has also committed to reducing its direct emissions by 80% by 2030.
The SSE profit upgrade came despite fossil fuel energy output falling by 14% for the period compared with 2020, reflecting the extraordinary gas price increases that have taken centre stage in UK politics during the winter months.
SSE’s profit upgrade came on the same day as the oil company BP announced its highest annual profits for eight years at £9.45bn, while its fellow FTSE 100 driller Shell made £14.3bn. The energy company profits have sparked calls for a windfall tax on fossil fuel companies.
SSE, formerly Scottish and Southern Energy, no longer provides energy to retail customers, meaning it has avoided much of the turmoil in that part of the market. British household bills will rise by a record 54% on average from April after the regulator lifted the cap on default tariffs to £1,971.
SSE Energy Services, SSE’s former energy arm taken over by Ovo Energy in 2020, faced criticism last month for advising customers to reduce their heatings bills by “having a cuddle with your pets” and “doing a few star jumps”.
