SSE, part of Britain's Big Six energy providers, said it lost customers in the third quarter but said it is on track to deliver a dividend increase.
In a trading update for the third quarter, Britain's second-largest energy provider said it lost another 50,000 customer accounts for a total of 8.08m total energy accounts, in line with customer losses seen earlier in the year.
Gas- and oil-fired generation nearly doubled to 12.8 terrawatt-hours (TWh) for the nine months to 31 December compared with 6.6 TWh in the period in 2015.
Renewable energy production was down 20 per cent, however, falling to 5.1 TWh from 6.8 TWh the previous year due to still, dry weather.
The FTSE 100 energy firm expects its capital and investment expenditure to be around £1.75bn for 2016-17, down from its target but still the highest annual investment and capital expenditure by the company to date.
SSE said it is on target to deliver adjusted earnings per share of at least 120p, and it still expects to report an annual increase in the full year dividend
Shares had fallen less than one per cent at the market open.
Why it's interesting
SSE was the first of Britain's Bix Six energy providers to promise a price freeze over the winter, capping prices at their current levels until "at least" April.
The utility provider said it planned to invest around £1.85bn in its business as part of a £4bn four-year plan to develop "secure, sustainable and low carbon energy infrastructure for the future" by March 2020. Now, it says it will fall slightly short of that goal.
The company, which operates brands such as Southern Electric, Scottish Hydro Electric and Atlantic, said a volatile wholesale energy market over the period made for a challenging operating environment, and dry and still weather led to low renewable energy output.
What SSE said
Alistair Phillips-Davies, chief executive, said SSE is designed for long-term growth:
"In a changing and challenging energy sector we continue to focus on operational efficiency, disciplined investment and maintaining a balanced range of energy businesses.
"Despite these issues, and several persistent uncertainties in aspects of the operating environment, SSE is well placed. Our fundamental strengths and opportunities for growth mean SSE is on target to meet its first financial objective of an increase in the full-year dividend, at least in line with RPI inflation."
What analysts said
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said SSE's high prospective yield of more than six per cent is a reflection of the fact that cash generation has been a problem for the group in recent years.
"Capex has surged, hitting a record high this year, but cash generation has remained stubbornly flat, with returns to shareholders fuelled by disposals rather than organic performance. That’s not sustainable in the long term, meaning the group will have to either slash costs or reduce capital expenditure.
"There could be pain ahead for retail customers as well. Price pressures are mounting, both as a result of higher energy prices and government policies, and SSE has only promised to cap prices until April 2017. The group is targeting cost savings, but we still wouldn’t be surprised to see prices rise."
SSE should hit its targets this year, but there is still trouble brewing in the sector.