SSE has reported a near-doubling of annual profits as its gas-fired power plants and gas storage sites cashed in on high and volatile prices during the energy crisis.
The FTSE 100 energy group denied that it was making windfall profits and sought to head off potential criticism by insisting that it was investing “far in excess” of its earnings. It set out plans for up to £40 billion of investment over the next decade, including £18 billion by 2027, more than 80 per cent of which would be in Britain.
SSE’s operations include electricity networks, wind farms, hydro-electric power plants, gas-fired power plants and gas storage facilities.
In the year to March this year its adjusted pre-tax profits increased by 89 per cent to almost £2.2 billion while its adjusted operating profits rose 65 per cent to more than £2.5 billion.
The jump was driven by its gas power plant and gas storage operations, where adjusted operating profits almost quadrupled to £1.2 billion from £331 million a year earlier.
The gas businesses, which benefited from high and volatile energy prices, are exempt from windfall taxes affecting gas producers and low-carbon power plants.
However, Alistair Phillips-Davies, chief executive of SSE, said: “I don’t think there are any windfall profits there.”
He said the company had invested in its gas businesses for a long time previously without making “particularly good returns” and these assets had been “critical to keeping the lights on and making sure that people are able to power their homes over the last year”. While it had now “made some money out of them”, he said they were profits “with a clear purpose” to fund investment. “We’ve got to remember the crisis in the UK was a gas crisis,” he said. “What we’re doing as a company is investing far more than we’re making money to make sure that we get away from that gas crisis.”
SSE went into the energy crisis operating five large gas-fired power plants in Britain and in September jointly acquired a sixth big station when it took over Triton Power, owner of the Saltend power plant in East Yorkshire, in partnership with Equinor. In mid-March it also belatedly started up operations at a seventh big plant, Keadby 2 in North Lincolnshire.
SSE said the Triton acquisition has boosted profits by £220 million while Keadby 2 had added £37 million.
The company said that its gas-fired power plants had navigated “extreme volatility in the forward power markets”, some of which it acknowledged was “directly attributable to the war in Ukraine and ensuing gas crisis”. It had benefited from higher power generation from its existing gas plants “together with higher power prices and a strong performance in the balancing market”.
SSE’s investment plans of £18 billion in the five years to 2026-27 are up from a previous plan of £12.5 billion in the five years to 2025-26.
Phillips-Davies said that the pace of its investment plans would hinge on government policies. “We have lots of shovel-ready projects,” he said. “What we’re encouraging governments and policymakers to do now is get into delivery mode. Let’s get these shovel-ready projects moving forward. Let’s make sure that we’re dealing with issues around planning, consenting, and just moving forward. We stand ready to make that investment.
“What we want to see is an acceleration of pace, and to make sure that the UK can compete against places like the US with their [Inflation Reduction Act], and indeed, European legislation will no doubt be coming forward. It’s about pace. Let’s make sure that the UK is the best place in the world or the easiest place in the world for people to invest.”