SSE has committed to reinvesting any further earnings from ultra-high wholesale power prices into building new domestic energy assets.
It explained that any “additional profit” it may generate as a result of the wholesale market volatility, triggered by the war in Ukraine, “will be reinvested in projects that will provide long-term solutions that help reduce the UK’s exposure to volatile international gas prices.”
The energy generation specialist expects to report adjusted earnings per share of at least 40p for the half-year, when it publishes its interim results in November.
It is now forecasting earnings per share of at least 120p for the full year, and promised to update the market on its full-year expectations later in the winter.
The strong offering to shareholders comes with FTSE 100 company forecasting an increase of more than 25 per cent in earnings this year, with its gas storage facilities and thermal power plants continuing the perform robustly through 2022.
These assets back up the grid during intermittent generation from wind and solar, helping to contain the effects of a fall in output from SSE’s renewables assets.
Renewable output in the 12 months of trading to September was 13 per cent lower than the company had expected.
SSE last year reported full-year EPS of 95.4p, which translated into pre-tax profits of more than £1.1bn.
Investec analyst Martin Young is forecasting adjusted EPS this year to rise to 138p, which would mean profits of nearly £1.7bn.
Electricity companies benefiting from extraordinary volatility in wholesale energy markets are in the sights of the opposition Labour party and others who believe they should be subject to a windfall tax.
SSE faces pressure from windfall tax calls
Prime Minister Liz Truss been consistently opposed to further windfall taxes, although Downing Street has so far maintained the Energy Profits Levy on North Sea oil and gas producers brought in by former chancellor Rishi Sunak in May.
It is now expected to raise £7.7bn this year – although it is unlikely this will be expanded onto eletricity generator.
SSE has fought against threats of windfall taxes, and has argued it was already investing at “record levels” in new energy infrastructure such as offshore wind farms.
The Labour Party, which is now well ahead in the polls, has suggested expanding the windfall tax to help fund relief from people’s energy bills.
It is one of a group of electricity generators that are in discussions with the UK government over new fixed-price contracts, being shifted from their renewable contracts to contracts for difference – comparable to deals for new wind projects.
Ministers hope that persuading nuclear and renewables operators to sign up to the new deals they may be able to lower electricity prices for households and businesses over the next few years.