Utility Week

UTILITY Week 21st November 2014

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UTILITY WEEK | 21sT - 27Th NovEmbEr 2014 | 19 Finance & Investment This week Warm winter slashes SSE operating profit Networks and supply save the day, but it has been a horrendous six months for generation SSE's generation business took a severe hit in the first half of the year because of lower temper- ature-led demand and weak wholesale prices, with operat- ing profit more than 85 per cent lower than in the same period in 2013. The energy company said in its first half financial results last Wednesday that operating profit from generation fell to £11.8 million, down 86.3 per cent from H1 2013. Output from the company's thermal generation fleet was lower because of weak demand over a mild UK win- ter, while its onshore wind assets generated 22 per cent less because of low wind speeds, the company said. Mild temperatures also led to lower gas produc- tion over the summer. SSE said operating profit for gas production slumped over 80 per cent compared with the first half of last year, to £13.3 million. Overall, operating profit from the wholesale side of its business – including generation, production and storage – fell 83.4 per cent year on year to £26.7 million. "The cumulative impact of a challenging business environment and persistently low production and consumption of energy mean SSE now believes adjusted earnings per share in 2014/15 will be at the lower end of the range set out in March 2014 and therefore will be around the same level achieved in 2013/14," said SSE chairman Lord Smith of Kelvin. The company still managed to report adjusted operat- ing profit 4.6 per cent higher at £370.3 million because of improved performance of networks and supply. JA ENErgY Eon UK supply profit down 30% Eon UK's profit from supply for the first nine months of this year fell by more than 30 per cent on the same period last year because of the mild winter, the company said last Wednesday. The UK arm of the German energy giant posted Ebitda of £158 million for the nine months, a fall of £78 million. In a statement, the company said lower energy demand over the winter caused supply rev- enue to fall from £5,876 million from January to September last year to £5,378 million. "Despite profit being down, we invested £50 million in our supply business," said Eon UK chief executive Tony Cocker. On the generation and upstream side, Eon posted profit 16 per cent higher than last year, despite a fall in revenue. Eon said the significant growth in its North Sea oil and gas activities contributed to the £39 million increase in profit for this side of the business, which rose to £281 million in the first three-quarters of this year. ENErgY RWE operating profit hit hard German energy giant RWE reported a 31 per cent year-on- year decline in operating profit for the first nine months of the year, saying the milder weather "le its mark" on the supply side of its business. The company said its €2.9 billion (£2.29 billion) operating profit was "in line with expecta- tions" aer a fall in revenues across Europe because of the mild weather conditions. For gas, revenue fell 23 per cent to €7,907 million, while electricity revenue dropped 3 per cent to €25,191 million. In the UK, gas revenue slumped 8.3 per cent to €1,453 million, while electricity revenue rose 3.7 per cent to €4,620 million. WaTEr Welsh Water social tariff launched Welsh Water has launched a new social tariff that will help more than 100,000 customers pay their water bills, the company said in its half-year results. It said the "innovative" social tariff would help cut bills by up to 55 per cent (£250) a year for disadvantaged customers from April 2015. The not-for-profit water com- pany also said it would keep its annual price increase below the rate of inflation until 2020. Welsh Water said it posted its "best ever operational perfor- mance in 2013-14" for a half year, with underlying profit of £43 million, up from £32 million in the same period in 2013. Demand for electricity was low last winter Stock watch 14.0 13.5 13.0 12.5 Eon sharE pricE, 11-17 novEmbEr 12 Nov 11 Nov 13 Nov 14 Nov 17 Nov 1,580 1,560 1,540 1,520 ssE sharE pricE, 11-17 novEmbEr The share prices of Eon and SSE fell aer the announcement of their interim results last Wednesday (see news, above). SSE's shares plummeted from 1,581p at the close of play on the day before the results to a low of 1,521p. The prices recovered slightly and stabilised at around 1,547p. Eon's shares opened at €13.80 on the day it released its nine-month interim results, but this has fallen steadily to €12.76 per share since publication. 12 Nov 11 Nov 13 Nov 14 Nov 17 Nov

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