SSE has confirmed it expects to see its earnings reduced by roughly £200 million over its current financial year due to the effects of the coronavirus.
In a third quarter trading update, the company said the impact of the pandemic on its operating profit is anticipated to fall towards the middle of the £150 million to £250 million range originally estimated in its last full-year results in June 2020.
Back in June, SSE also announced plans to dispose of £2 billion of “non-core” assets over 2020/21. The company said it is “on track” to achieve the target, with the sale of its shares in three energy-from-waste plants for £995 million in October and its gas exploration and production assets in December bringing the cumulative total to more than £1.5 billion.
SSE said it has also appointed banks to review options for the sale of all or part of its 33.3 per cent stake in gas distribution network SGN and will decide on the approach and timings before the end of the current financial year.
It said is similarly making “good progress” on its plans to invest £7.5 billion in low-carbon energy over a five-year period, noting its sale of a 10 per cent stake in Dogger Bank A and B to Italian oil company Eni in December shortly after giving the final go-ahead to the offshore wind projects, as well as the ongoing construction of the Viking and Seagreen windfarms.
The firm welcomed the “positive change” to totex allowances in Ofgem’s final determinations for the RIIO2 price control for electricity transmission but said it is “disappointed that the financial parameters did not reflect the evidence put before Ofgem.”
“SSE continues to engage constructively with the regulator to secure an ambitious, fair and balanced price control settlement that is acceptable to all stakeholders,” it added.
SSE said it also encouraged by the government’s “renewed commitment to effective long-term carbon pricing” but until the new UK emissions trading scheme is introduced the company will “temporarily adjust its approach to the forward hedging of its thermal generation output for periods beyond March 2021.”
“This is likely to mean SSE will suspend forward hedging and instead will commit generation plant nearer to delivery,” the update stated. “This is not expected to have a material impact on profits.”
SSE finance director Gregor Alexander said: “With solid operational performance and strong strategic execution, SSE is well positioned as we move towards the end of our financial year.
“Our robust business model is mitigating the impact of coronavirus, our disposal programme is proceeding at pace and at Dogger Bank we have shown yet again that we can develop opportunities and create value from world-class assets.
“With a number of uncertainties lifting and an increasingly supportive policy environment which further underpins our clear strategic focus on the transition to net zero, SSE is on a strong strategic footing for the rest of 2020/21 and beyond.”