SSE – mild weather causes a shortfall in renewable energy output
- SSE’s half-year revenue fell 14.9% to £4.8bn
- Underlying earnings per share of 37.0p, ahead of group guidance
- Interim dividend of 20p, with full-year payment rebased lower at 60p
Aarin Chiekrie, equity analyst at Hargreaves Lansdown:
“Power utility, SSE, had been hoping for a return to more normal weather in the second quarter, after a slow start to the year for its renewable energy assets. But that didn’t materialise as unfavourable weather conditions have left renewable’s output 19% lower than planned. That means other parts of the business are having to pick up the slack, leaving little room for further slippage if full-year guidance is to be hit.
Looking ahead, SSE’s staying the course with its pivot towards renewable energy. The five-year investment budget’s been increased to a mammoth £20.5bn, with 90% of that set to be invested in electricity networks and renewables. Turbo-charging efforts towards renewables is a bold and admirable move. But the shift comes with a hefty dose of risk – they’re not always reliable. Fortunately, the Thermal division’s flexible gas-fired plants helped to plug the energy shortfall, and profits here more than tripled.
But as with all things, there’s some give and take. The upgraded investment budget and plans are likely good in the long term, but it’s putting pressure on the group’s cash resources in the near term. So as expected, in a bid to free up cash, the group confirmed it will rebase its dividend down from 96.7p last year to 60p this year. That may change the outlook for some investors that own SSE for the supposedly reliable dividend payments. Long term though, if SSE can deliver on its promises, shareholders staying the course at current prices will likely be rewarded for their patience in the form of capital gains.”
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