SSE reaffirms guidance despite challenges in renewables

The FTSE 100 company said its third quarter ended 31 December saw adverse weather conditions and operational hurdles, including the impact of ten named storms, leading to lower-than-planned renewables output.

Its renewable energy arm, SSE Renewables, reported a shortfall of about 15% compared to projections for the first three quarters, largely attributed to a mix of adverse weather conditions, short-term plant outages, and rescheduling of hydro output.

The current quarter had seen a continuation of mixed weather patterns affecting the renewables fleet.

In the thermal sector, SSE Thermal saw lower spark spreads and market volatility compared to the corresponding period the previous year.

Nevertheless, the business remained on track to achieve its guidance of over £750m in adjusted operating profit for the fiscal year, including more than £75m from gas storage.

The final earnings outcome for the year remained contingent on factors including plant availability, market conditions, and weather patterns for the remainder of the fourth quarter.

SSE said it would provide an update on its performance for the closing months of the year.

Despite the operational hurdles, SSE said it was committed to its investment plans, with around £2.5bn earmarked for investment and capital expenditure in 2024.

Progress was continuing on the ‘Net Zero Acceleration Programme (NZAP) Plus’, with significant investments underway in critical infrastructure projects.

SSE's transmission investment programme, managed by SSEN Transmission, was progressing well, with work underway on the Eastern Green Link 2, a high-voltage direct current (HVDC) link from Peterhead to Yorkshire.

Additionally, SSEN Transmission successfully issued a £500m 20-year green bond to finance vital national infrastructure projects.

While progress had been made on renewables projects such as Viking in Shetland and Yellow River in Ireland, challenges persisted, particularly with turbine installation on Dogger Bank A, which was hampered by adverse weather conditions and supply chain delays.

SSE said it was actively collaborating with supply chain partners to mitigate the challenges and expected to provide a further update on progress in May alongside the publication of its 2024 results.

SSEN Distribution was said to be resilient during the quarter, successfully restoring power to customers impacted by ten named storms, including two classified as exceptional events.

The business restored power to 99% of customers within 48 hours during Storm Gerrit in December, despite facing winds of up to 90mph in the North of Scotland.

The quarter also saw positive developments in the policy and regulatory environment, further supporting SSE's net-zero-focused strategy.

SSE noted Ofgem's Sector Specific Methodology Consultation for the RIIO-3 framework, significant increases to the Administrative Strike Price for Allocation Round 6 of the Contracts for Difference framework, and progress in developing routes to market for carbon capture and storage (CCS), hydrogen, and long-duration energy storage projects.

“Whilst the quarter has seen the business navigate some short-term challenges, we reiterate and continue to focus on the delivery of our 2027 financial and operational growth targets established in the NZAP Plus,” said chief executive officer Barry O'Regan.

“The strength of our balanced business mix and the growth opportunity it provides is aligned with a policy environment which increasingly recognises the essential role renewables, electricity networks and flexible power will play in the energy system of the future.

“Our long-term strategy remains unchanged and will deliver sustainable value for shareholders and society.”

At 0823 GMT, shares in SSE were down 1.6% at 1,626.5p.

Reporting by Josh White for Sharecast.com.