(Reuters) - British power company SSE Plc SSE.L warned this year's hot and calm weather and higher gas prices had already knocked 190 million pounds off profits from its earlier plans, sending its shares nine percent lower.
Britain’s second largest energy supplier said it expected profit to halve in the six months to the end of September compared to the same period a year ago.
“Lower than expected output of renewable energy and higher than expected gas prices mean that SSE’s financial performance in the first five months has been disappointing and regrettable,” Chief Executive Alistair Phillips-Davies said.
It said an 80-million-pound hit to first-quarter earnings that it flagged in July had risen to 190 million pounds in the first five months of the year. As well as hitting renewable output, the heatwave also depressed demand.
It said its wholesale business would show an adjusted operating loss for the six months to the end of September, driven largely by problems with the cost of power supplies and generation.
Its Energy Portfolio Management sub-segment, responsible for ensuring the company has the energy supplies it requires to meet the needs of customers, was expected to show a 100 million pound loss.
Germany's biggest energy group by market value, E.ON SE EONGn.DE affirmed its guidance after profit warning by SSE.
(Graphic: British Energy Providers Feel The Heat - tmsnrt.rs/2CJ043M)
Perth, Scotland-based SSE has been losing customers as smaller entrants challenge traditional players with aggressive pricing and is set to combine its retail power unit with Npower, owned by Germany's Innogy IGY.DE, to create Britain's second-largest retail power provider.
On Wednesday it said adjusted operating profit at the retail business, which supplies power to 3.7 million homes, offices and companies, should be “around break-even” in the first half.
SSE also said the price cap on default energy bills proposed by Britain’s energy regulator last week would result in significantly lower full-year profit at its energy services division than expected at the start of the year.
Ofgem last week proposed a price cap that it said would save households about a billion pounds a year. It aims to implement it in time for winter following a government promise to tackle “rip-off” power prices.
SSE said it continues to expect to recommend a full-year dividend of 97.5 pence per share for 2018/19 and stick to a five-year dividend plan announced in May.
“Pledging to make good its promise on the dividend will sugar the pill of another profit warning, but with earnings falling and investment requirements stretching well into the billions, SSE can ill-afford more slip ups,” said George Salmon, equity analyst at Hargreaves Lansdown.
Reporting by Justin George Varghese in Bengaluru; Editing by Keith Weir
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