SSE warns on Labour nationalisation; ups guidance

Perth-based energy giant SSE plc on Wednesday warned of challenges for energy firms due to the UK election next month and the Labour Party’s plans to nationalise some energy infrastructure.

SSE said its adjusted profit before tax on continuing operations rose 15% to £263.4 million in the six months to September 30.

SSE also increased earnings guidance for the full year.

“In September 2019, SSE’s forecast full year adjusted earnings per share was around 80p-85p, taking into account the impact of holding its interest in gas production for sale,” said SSE.

“Gas production interests comprise assets and hedging contracts. The structure of the proposed disposal means the hedging contracts will be retained and are not accounted for as held for sale. 

“It is estimated this will add around 3 pence to SSE’s previous forecast for adjusted EPS for FY 19/20 taking it to around 83p-88p.”

If it wins power in the December 12 election, Labour has pledged to nationalise energy networks and set up a state-owned company to develop and own stakes in the UK’s offshore wind farms.

SSE CEO Alistair Phillips-Davies told journalists on Wednesday that Labour’s plans would be hugely disruptive for the energy industry and could put at risk the UK’s leadership position in offshore wind.

“Whilst the imperative to tackle climate change creates a tailwind behind SSE’s strategy, exemplified by the UK Parliament legislating for net zero emissions by 2050, the energy sector continues to face a complex and challenging operating environment,” wrote Phillips-Davies in SSE’s results statement.

“This is illustrated by the uncertainty arising from the UK general election, the Labour Party campaign for sector nationalisation and public policy outcomes becoming the subject of judicial processes.”

SSE said in its results statement that SSE Energy Services, its British household energy supply business, “continues to be classified as held for sale and the group’s investment in gas production has also been classified as held for sale …

“Adjusted operating losses of the discontinued operations for the six months are £22.7m; reported operating losses are £511.8m (including £489.1m of impairment charges relating to SSE Energy Services).”

SSE added: “Agreement to sell SSE Energy Services to OVO Energy Limited on course for completion in early 2020, subject to the necessary regulatory approvals …”

SSE chair Richard Gillingwater said: “SSE is progressing well in the execution of its lowcarbon strategy with the sale of SSE Energy Services leading to group more focussed on renewable energy and regulated electricity networks.  

“SSE Renewables has an enviable development pipeline bolstered by recent success in securing valuable Contracts for Difference and we have strong business plans for the upcoming Transmission price control.

“Our growth is aligned to net zero emissions and looking ahead to COP 26 in Glasgow next year, we will be encouraging even faster decarbonisation.

“Clearly some headwinds remain in the sector with political uncertainty and aspects of UK government policy being subject to judicial process, however, we have strong optionality to create value through the low carbon transition and deliver our dividend commitments.”