SSE PLC (LON:SSE)’s output of electricity from SSE-owned renewable sources across the UK & Ireland was 10% lower than planned at 0.76TWh for the nine months to 31 December 2022. This was impacted by unseasonably calm and dry weather and delays to the Seagreen offshore wind project, which is still expected to complete on time in summer 2023.
Output of electricity from SSE’s gas-fired generation plant was 27% higher than the same period last year.
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The group upgraded its full-year underlying Earnings Per Share (EPS) guidance from at least 120p to more than 150p. This was helped by the diversity of its revenue streams, and reflected increasing clarity over wholesale energy prices and state levies on Electricity Generators.
The intention to pay a full-year dividend of 85.7p per share plus RPI for 2022/23 has been reiterated. This is expected to drop to 60p in 2023/24 and increase by 5% per year for the next two years to help support the group’s “significant” investment and growth plans. However, no dividends can be guaranteed.
The shares rose 2.8% following the announcement.
SSE Raises Full-Year EPS Guidance
Aarin Chiekrie, Equity Analyst at Hargreaves Lansdown:
SSE raised its full-year EPS guidance for 2022/23 by a lofty 25%. Higher gas prices and better gas storage optimisation were to thank for this, helping to offset lower than expected renewables output.
Overall, the struggling markets appeared to like this update and the group’s valuation is now trading up around 9% over the past year. Despite the rebase of its dividend to fund investment plans, the group’s still paying a healthy dividend at a 3.9% forward yield. But remember, no dividends are guaranteed.
The British power firm remains on course to deliver record investment in excess of £2.5bn this year. The turbo-charged efforts to accelerate its transition to renewables is a bold and admirable move. The push to be at the forefront of the UK’s energy transition puts the group in a unique position to potentially enjoy steeper growth ahead.
However, renewables carry an inherent risk which this latest trading update highlights - they’re not always reliable sources of energy. To some degree, you’re at the mercy of mother nature. Unseasonably calm and dry weather this winter left the group’s renewable output some 10% lower than planned. This means that gas-fired generation plants will still have to make up the energy shortfall for now.
