Interim Management Statement

RNS Number : 1199W

Scottish & Southern Energy PLC

23 July 2009

 



SCOTTISH AND SOUTHERN ENERGY PLC

INTERIM MANAGEMENT STATEMENT

Scottish and Southern Energy plc ('SSE') will today advise shareholders at its Annual General Meeting in Perth about its performance since the start of the current financial year, which began on 1 April 2009. This Interim Management Statement includes updates on operations, major projects, other developments and the financial outlook. 

Operational Update

In the three months to 30 June 2009 (comparisons with the same three months in 2008, unless otherwise stated):

• SSE's Total Recordable Injury Rate was 0.10 per 100,000 hours worked, compared with 0.16 during 2008/09 as a whole;

• the number of electricity and gas supply customer accounts in Great Britain increased by more than 50,000 to over 9.1 million; including the Irish All Island Energy Market and home services, SSE's total customer base is now 9.5 million;

• gas-fired power stations achieved 66% of their maximum availability to generate electricity, excluding planned outages (availability at stations other than Medway, which returned to service in June after a prolonged outage, was 95%); coal-fired stations achieved 97%; 

• renewable energy output (from conventional hydro electric schemes, wind farms and dedicated biomass plant) was 1,116GWh, compared with 967GWh;  

• the number of units of electricity distributed was 9.4TWh, compared with 9.9TWh; 

• the number of Customer Minutes Lost in the Scottish Hydro Electric Power Distribution area was 14, compared with 16; in the Southern Electric Power Distribution area it was also 14, compared with 15; and 

• the amount of gas transported by Scotia Gas Networks, in which SSE has a 50% stake, was 28.0TWh, compared with 32.8TWh.

Major Projects Update

In March 2008, SSE set out plans to invest around £6.7bn in the five years to March 2013 and in its full-year results statement on 21 May 2009 stated that its priorities during 2009/10 include delivering efficient investment throughout its activities, especially in the major projects in generation, electricity networks and gas storage.  

Since then, progress has been made in the following key areas:

• Marchwood:  Work on the construction of the new 840MW CCGT (combined cycle gas turbine) plant in Southampton by Marchwood Power Ltd, a 50:50 joint venture between SSE and ESB International, remains scheduled for completion in the autumn of 2009. Earlier this month, the steam turbine was synchronised and the plant run up to full load. Functional testing and National Grid compliance tests are ongoing, ahead of the reliability run which is scheduled to commence shortly.  With a net thermal efficiency in excess of 58%, it will be one of the most efficient gas-fired power stations in the UK. The station's completion will take the installed capacity of SSE's electricity generation portfolio (including its share of joint ventures and associates) to over 11,000MW. All of its output is contracted to SSE.

• Greater Gabbard:  Offshore construction work is now under way at the 500MW Greater Gabbard offshore wind farm, with the installation of the offshore transformer platform foundation in the outer Thames Estuary on schedule. Installation of the first turbine foundations will commence shortly. Greater Gabbard, in which SSE has a 50% stake, is expected to have a load factor of over 40% and produce around 1,900GWh of electricity in a typical year, of which SSE will take 50%. The wind farm is expected to require a total investment by SSE of around £650m, excluding connection to the electricity grid, and remains on course to be completed by 2012.

• Clyde:  Pre-construction work at SSE's 350MW Clyde wind farm in southern Scotland is under way, and good progress has been made in addressing the radar-related issues associated with the consent granted for the development. SSE and NATS (En Route) plc have signed a primary radar mitigation scheme which was approved by Scottish Ministers earlier this month, allowing full construction work to get under way later this year.  Clyde is expected to have a load factor of around 35% and produce over 1,000GWh of electricity in a typical year. Its construction cost is expected to be around £500m and it should be completed in 2012.

• Griffin:  Pre-construction work is also under way at the Griffin wind farm in Perthshire, in which SSE currently has a 90% stake, and which will have a capacity of between 120MW and 165MW, in advance of full construction work beginning later this year.  The construction cost for the whole wind farm is expected to be around £200m and it should be completed in 2012.

• Beauly-Denny:  The Scottish government has said that Ministers expect to take a final decision on the proposal to replace the Beauly-Denny electricity transmission line, of which 200km is in SSE's Scottish Hydro Electric Transmission area, 'later this year'. In June 2009, the all-party Economy, Energy and Tourism Committee of the Scottish Parliament published its report on energy. The findings of the report include a recommendation that 'the Scottish Government speeds up procedures to give consent to new, large-scale developments within Scotland's national electricity infrastructure, including the proposed Beauly-Denny line, so that Scotland can unlock its renewable energy potential and meet challenging climate-change targets'.

• Aldbrough:  Progress on the construction of the new gas storage facility being constructed at Aldbrough in East Yorkshire by SSE and Statoil (UK) Ltd enabled some commercial operations to begin from 9 June. In the first five weeks after that date, around 3.5 million therms of gas was injected and around 10 million therms was withdrawn. Capacity for gas storage at Aldbrough is expected to become available in at least one more cavern during 2009/10, taking the total to at least three. As previously stated, it will take three more years of detailed project management and continued investment to complete Aldbrough. So far, SSE has invested £165m in engineering and construction works at the development and now expects to invest a further £125m between now and its completion.

Other Developments

Since the publication of its preliminary results, SSE has also: acquired the 20MW Slieve Divena II wind farm project in Northern Ireland; hosted the official opening of the Glendoe hydro electric scheme; announced proposals for two new large scale hydro electric pumped storage schemes in the Great Glen; secured consent to develop at 468MW offshore wind farm called Den Helder 1 off the cost of the Netherlands; acquired a data centre business from Cantono Data Centre Services Limited; and applied for an inset appointment as the water and sewerage company providing services for an area at Kennet Island in Berkshire.

As previously stated, the progress of the pumped storage schemes and other such developments will be dependent upon a satisfactory public policy and, where relevant, regulatory framework. In October 2007, SSE announced a FEED (Front End Engineering Design) study into a proposal to replace the existing conventional boiler at Peterhead power station with a new state-of-the-art gas turbine to increase the modern CCGT capacity at the station from 1,180MW to 1,520MW (the maximum transmission export capacity, out of a total plant capacity at the station of 2,300MW). In doing so, it said 'transmission charges will be an important factor' in whether to proceed with the investment. Unfortunately, the current arrangements for charging for electricity transmission in Scotland mean that such a development would not be economic. Moreover, they also mean that SSE intends to dispose of two of the station's gas turbines with a total capacity of 230MW. 

Financial Outlook

SSE remains on course to deliver sustained real dividend growth in the years ahead and, specifically, to deliver at least 4% annual real growth in respect of 2009/10. Its balance sheet remains one of the strongest in the global utility sector, regardless of the outcome of the three-month credit watch announced by Moody's in July 2009, and it remains on course to secure additional funding of around £400m from the European Investment Bank later this year. In addition, since the start of this financial year, SSE has entered into £1 billion of short-term credit facilities, which mature in June 2012, none of which has been drawn.

SSE will publish its interim results for 2009/10 on 11 November 2009. As stated in previous years, and again in its Annual Report 2009, SSE's emphasis is on adjusted profit before tax on a full-year, as opposed to six-monthly, basis because interim results are more likely to fluctuate, with unusual variations or exceptional circumstances. In 2008/09, just under one quarter of SSE's adjusted profit before tax was delivered in the first six months, which was a much lower proportion than in previous years. In 2009/10 the first half proportion is likely to revert to a more typical level for SSE. As a result, adjusted profit before tax for the six months to 30 September 2009 is expected to be significantly higher than in the same six months in 2008. For the year as a whole, SSE still expects to deliver a moderate increase in adjusted profit before tax.

Ian Marchant, Chief Executive of SSE, said:

'SSE's strategy of operating and investing in a balanced range of regulated and non-regulated energy businesses supports our fundamental commitment to delivering year-on-year real growth in the dividend. The first three months of our financial year have seen steady progress across our key operations and major investment projects, and given us a good start on the road to achieving moderate growth in adjusted profit before tax in 2009/10.'

 

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