SSE fails to rule out higher energy prices

20th May, 2010

SSE fails to rule out higher energy prices

UTILITY giant Scottish & Southern Energy yesterday pledged to continue pushing through above-inflation dividend increases for the next three years, but said it could not rule out energy price rises.

Ian Marchant: Has pledged to raise dividends until 2013.

Ian Marchant, chief executive of the Scottish Hydro owner, which now boasts more than nine million customers across the UK, said the firm would hike dividends at least two percentage points above inflation in each of the three financial years to March 2013.

That is below the increase of at least 4 per cent above inflation in the period 2007 to 2010. Marchant said the partial reining-in was because SSE was entering a period of greater capital investment that meant "we need a little bit more cash in the business".

However, unveiling a steady rise in annual profits, he said the Perth-based group was one of only seven British companies that had increased dividends above the retail prices index every year in the past decade.

"We are an income stock," Marchant said. "You don't buy us for the ethereal view of superior financial returns. Instead, you get a good dividend yield you can hang your hat on."

He added that the latest divi pledge time frame was "long enough to be worth having" but not so long as to be hedged by uncertainty on the trading climate to fulfil it.

Marchant's comments came as SSE boosted its latest annual dividend to end-March 6 per cent to 70p, via a 49p final payment, on the back of underlying pre-tax profits edging up nearly 3 per cent to £1.29 billion.

Operating profits at SSE's generation and supply business jumped by more than £60m to £896m, accounting for more than half of the group's overall operating profits.

SSE, which has 9.2 million customers, said underlying demand had stopped falling for industrial customers but for domestic customers it was still dropping because of energy efficiency.

On future prices, Marchant said his "best guess" was that there would be no change in this calendar year. He added: "It's not in my gift. It depends on what happens to gas wholesale prices." The SSE boss said in the past six weeks gas prices had gone up quite significantly to 53p a therm "which is in quite difficult territory" from a price "in the low 40ps (per therm] where there might be scope for a price reduction".

SSE, which also owns Southern Electric and Swalec in England and Wales, cut gas bills 4 per cent in March.

Marchant said a drive on safety had cut working days lost from injury from 361 to 73.

Meanwhile, the bad winter meant water held in its hydro-electric reservoirs slumped to 52 per cent of the maximum from 73 per cent in the previous year.