Scottish and Southern Energy plc (SSE) has distributed 31.2TWh units of electricity for the nine months ended 2008, compared with 30.8TWh units of electricity in the year-ago period. The Scotia Gas Networks has transported 110.7TWh of gas, compared with the 105.3TWh of gas in the year-ago period. The output from conventional hydro electric schemes and wind farms (including Airtricity) was 3.35TWh, compared with 2.36TWh (excluding Airtricity) in the year-ago period.
In the nine months to December 31, 2008 (comparisons are with the same nine months in 2007):
The number of Customer Minutes Lost in the Scottish Hydro Electric Power Distribution area was 52, compared with 47; in the Southern Electric Power Distribution area it was 47, compared with 49;
The number of energy customers reached nine million for the first time, compared with 8.3 million;
The total output from coal-fired power stations was 4.39TWh, compared with 10.14TWh; from wholly-owned gas-fired stations it was 11.59TWh, compared with 12.53TWh.
During the period, the coal-fired power stations operated under limits on their output of electricity, pending the commissioning of flue gas desulphurisation equipment, which no longer apply (see below). Although there have been increases in output of electricity from a number of SSE’s gas-fired power stations, total output has continued to be affected by a series of technical issues at Medway, including the steam turbine failure which occurred in September. Returning the station to service remains a top priority, and this is now expected to take place around the end of next month. The outage itself is the subject of an insurance claim.
Major Projects Update
In addition to delivering a high standard of performance in its operations, SSE stated in its financial report on November 12, 2008 that its priority for the second half of 2008/09 is to meet key milestones in its investment programme. Since then, progress has been made in the following key areas:
The maximum 100 megawatt (MW) of electricity was successfully generated for a full 24 hours at the new Glendoe hydro electric scheme for the first time in December, following which it was formally commissioned and transferred to SSE’s Generation Operations’ portfolio. During January, it generated 12.7GWh of electricity.
The progress made in commissioning flue gas desulphurisation equipment at Fiddler’s Ferry and Ferrybridge power stations means SSE is now able to operate all of its 3,000 MW of plant opted in to the Large Combustion Plant Directive in line with its limits on emissions of sulphur dioxide – and without any further Article 5(1) derogations or restrictions on either running hours or electricity output. During January, 2009 the two stations generated 1.48TWh of electricity.
Commissioning has begun at the new 840 MW combined cycle gas turbine plant at Marchwood in Southampton, a 50:50 joint venture between SSE and ESB International, and the ‘first firing’ of the gas turbines is scheduled to occur around the end of this month.
Dewatering of two caverns at the new Aldbrough gas storage facility, a two thirds/one third joint venture between SSE and Statoil UK Ltd, has made sufficient progress to allow around 65 million cubic metres of storage capacity to become operational before the end of this financial year.
Energy Prices Update
The falls in wholesale energy prices which started between July and October 2008 have been maintained and mean SSE, which supplies energy as Southern Electric, SWALEC, Scottish Hydro Electric and Atlantic, is able to deliver its first cut in domestic energy prices since March 2007 (it was the last of the major suppliers to introduce a price increase in the early part of 2008). SSE is today announcing that average prices for electricity will reduce by 9% and for gas they will reduce by 4% on 30 March 2009.
In addition to the developments described elsewhere in this Statement, SSE acquired in December 2008 17.5% of the equity in RockTron (Widnes) Ltd, the developer of the new plant being constructed at Fiddler’s Ferry to extract minerals from ash, for a total cash consideration of GBP10 million.
It has also acquired stakes in wind farm projects in Scotland and the Republic of Ireland with total final capacity in the range of 180 MW-250 MW (depending on the most economic turbine option) for a total investment, including relevant construction costs, of just over GBP300 million. SSE now has 3,500 MW of renewable energy capacity (onshore wind, offshore wind, hydro and dedicated biomass) in operation, under construction or with consent for development in the UK and Ireland. Including the Butendiek and West Rijn offshore wind farms, SSE’s overall total is now around 4,000 MW.
SSE and Iberdrola announced in January their intention to form a joint venture with the initial aim of securing sites suitable for the development of nuclear power stations. SSE accepts that one more tranche of nuclear power stations is necessary from around the end of the next decade to ensure achievement of the UK’s energy policy goals, and it recognizes that it will have to continue to be able to source power generated from nuclear stations if it is to meet customers’ energy needs in the long term. This supplements SSE’s core investment strategy, which is to focus on renewable energy and on thermal generation of electricity with diminishing carbon intensity.
On January 19, 2009 Ofgem announced it had decided to close a Competition Act 1998 case into the behavior of Scottish Power and SSE in the wholesale electricity market. This was in line with SSE’s view that its actions in electricity generation have always been consistent with a competitive market.
Ian Marchant, chief executive of SSE, said:
I am pleased with the financial and operational progress we have made so far in the second half of this financial year, including today’s announcement of a cut in prices for our energy customers.
“Despite a turbulent year in financial and energy markets and in the economy as a whole, we are still on course to deliver a modest increase in adjusted profit before tax and a full-year dividend of at least 66.0 pence per share. “In a period in which little can be taken for granted, the importance of profitability and dividends has been reinforced. The challenges are ongoing, but the fundamental strength of our strategy – the efficient operation of, and investment in, a balanced range of regulated and non-regulated energy-related businesses – is again being demonstrated. “Our priority now is to deliver on it for the rest of this financial year and beyond. We have put ourselves in a position to get 2009/10 off to a good start, with a balanced series of steps to finance future investment, substantial progress in our programme to develop new assets and the announcement of the reduction in electricity and gas prices.”