Utility Week

UTILITY WEEK | 6TH - 12TH APRIL 2018 | 21 This week SSE warns of period of uncertainty Profits are expected to be higher than forecast, but challenging times will not 'relent' soon In a trading statement published in advance of its full year results, due in May, SSE said it expected profit to be ahead of guidance for the 2017/2018 financial period, but that "the 2018/19 financial year is expected to be one of transition for the SSE group". The uncertainty is linked to the company's ongoing plans to merge its UK retail business with Innogy's to form a new, independent supplier, but also, it said, because there is ambivalence over whether or not legislation will be enacted to cap domestic gas and electricity tariffs. Despite these concerns, it said it continues to target an annual increase in the full-year dividend for 2018/19 at least equal to inflation. SSE finance director Gregor Alexander said the 2017/18 financial year had involved "significant chal- lenges", which "are not expected to relent". He said: "Throughout the year, we will retain our strong operational and investment focus, while prepar- ing the businesses in the SSE group for the important developments that lie ahead." The company said it was expecting to report adjusted earnings per share of just over 120p for 2017/2018, with adjusted operating profit from its wholesale division set to be "significantly higher" than a year earlier, thanks to increased output from its renewable and gas-fired generating plant. But profits from networks are expected to be £150 million lower than in 2016/2017, while its retail division will be broadly in line with the previous year. AC WATER UU trading in line with expectations United Utilities has announced it is trading in line with group expectations and on course to see a slight increase in revenue on last year's £1.7 billion, with "moderately higher" underlying profits than 2017's £662 million. The solid performance from the Moody's A3-rated utility comes despite an uncertain background for the sector, with increased regulatory scrutiny and political volatility. United Utilities said its "responsible approach" to financial risk management continues to deliver benefits, including "a strong balance sheet, a stable pension surplus and gearing comfortably within its target range of 55 per cent to 66 per cent net debt to regula- tory capital value" (expected to increase by around £400 million due to RPI). ELECTRICITY Green subsidy-free 'revolution' by 2030 Britain is on the brink of a subsidy-free renewables "revolu- tion" which could create up to 18GW of new capacity by 2030 and attract £20 billion of invest- ment, analysts have claimed. Aurora Energy Research said the explosion of subsidy-free renewables would largely snuff out the already dim prospects for new combined-cycle gas turbines. Analysis by Aurora suggested 9GW of solar, 5GW to 6GW of onshore wind and 3GW to 4GW of offshore wind could be built without subsidies by the end of the next decade. It predicted solar and onshore wind would reach grid parity in the early 2020s, while offshore wind would hit the milestone in the late 2020s or the 2030s. To achieve the projected build out, financing costs would need to be lowered through a better understanding of the merchant risks for renewable generation. ENERGY Clean energy in UK is a 'goldmine' The government should publish a national capital-raising plan to deliver the Clean Growth Strategy and set up a £100 mil- lion fund to develop local green energy projects, its green finance task force has recommended. The report, jointly submitted to BEIS and the Treasury, recom- mends the National Infrastruc- ture Commission (NIC) be tasked with mapping the amount of capital needed to deliver the strategy. This exercise should be incor- porated into the National Infra- structure Assessment, which the NIC is currently drawing up. Renewables making an increased contribution Stock watch SSE SHARE PRICE, FIVE DAY SSE expects to deliver adjusted earnings per share of just over 120p for 2017/18, the company announced in a trading update last week. The figure was higher than its previous projection of 116p to 120p, most likely because of the recent cold weather. There was a small and short-lived uptick in its stock price as trading opened on the day of the announcement (29 March), but at the time of publication had dropped to about 1,260p a share. 1220 1320 1300 1280 1260 1240 27 Mar 28 Mar 3 Apr 29 Mar Finance & Investment

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