SSE to Enter Close Period (UK)

SSE (Scottish and Southern Energy plc) will enter its close period on 1 October 2011, prior to the publication on Wednesday 9 November 2011 of its financial report for the six months to 30 September 2011.

As stated in its Interim Management Statement on 21 July 2011, SSE expects that a particularly large proportion of its adjusted profit before tax will be delivered in the second half of this financial year. This means that adjusted profit before tax for the six months to 30 September 2011 will be significantly lower than in the same six months in 2010 and 2009, but this should have no implications for the full financial year.

SSE remains on course to achieve its principal financial objective for 2011/12, an increase of at least 2% more than RPI inflation in the dividend payable to shareholders, and expects to maintain a dividend cover around its established range.

SSE’s capital and investment expenditure for 2011/12 is forecast to be around £1.7bn. It is designed to support future dividend growth and SSE continues to prioritise the successful completion of key large capital projects, where the following progress has been made:

 Clyde onshore wind farms (350MW development): The construction of Clyde South (130MW) has been completed and all 56 turbines have begun to export electricity to the national grid. This is earlier than forecast at the start of the financial year. Preliminary Renewable Obligation Certificate (ROC) accreditation has been secured for Clyde South. Construction work is continuing at Clyde Central and North (220MW in total) and this should be completed in the middle of 2012. The Clyde wind farms are expected to produce over 1,000GWh of electricity in a typical year and the construction cost is expected to out-turn at over £500m.

Griffin onshore wind farm (156MW development): The first export of electricity from Griffin to the national grid took place at the start of May and preliminary ROC accreditation has been secured. Of the 68 turbines that will make up the wind farm when it is completed, 27 have already begun generating ,and are able to export electricity. The wind farm was scheduled to be completed in the spring of 2012, but is now on course to be completed earlier, before the end of this calendar year. It is expected to produce over 350GWh of electricity in a typical year, and its construction cost is expected to out-turn at over £200m.

Gordonbush onshore wind farm (70MW development): Turbine delivery and installation has now begun, with the first generation of electricity due to take place before the end of the calendar year. The wind farm should, therefore, be completed around the end of this financial year. It is expected to produce around 180GWh in a typical year and its construction cost is expected to be just over £100m.

Other onshore wind farms under construction or pre-construction (nine sites; 138MW): At the start of the current financial year, SSE had nine other onshore wind farms with a total capacity of 138MW under construction or in pre-construction. Construction of the first of these, Rathcahill (12MW) in County Limerick, has been completed. Slieve Kirk (27MW) in Northern Ireland is expected to be completed next, around the turn of the year.

Greater Gabbard offshore wind farm (500MW development; SSE stake in Greater Gabbard Offshore Winds Limited – 50%): All 140 monopiles and transition pieces are in place at the wind farm. As planned, turbine installation resumed earlier this month and 115 turbines have now been installed. A total of 72 turbines have now been energised. Both offshore substations were energised earlier this year and over 80% of the total subsea cable length is now in place. GGOWL remains in a contractual dispute with Fluor Limited, the principal contractor for the wind farm. The dispute relates to: the need for assurance of the quality of monopiles and transition pieces used in the early stages of the development and supporting potentially up to 52 of the turbines; and the claim by Fluor Limited of around £300m relating to time and costs associated with alleged additional testing and repairs of some of the welds on these pieces of equipment, against which GGOWL has submitted what it believes is a very robust defence. GGOWL is also continuing to test the structural integrity of a number of the monopiles and transition pieces that are the subject of this dispute to determine whether they meet the required standard and it retains the option of submitting its own substantial claim against Fluor Limited should the need arise. Although disputes of this kind can present potential risks to project timetables, all 140 turbines should be installed and energised, as planned, before the end of 2012.

Walney offshore wind farm (367MW; SSE stake 25.1%): The first phase of Walney (183.6MW) became operational earlier this year and secured ROC accreditation. This added 46MW to SSE’s total electricity generation capacity. Construction of the second and final phase of the wind farm, which also comprises 51 turbines with a total installed capacity of 183.6MW, is now well under way. All turbines have now been installed, and the first generation of electricity is expected to take place shortly. Phase two of the wind farm will be commissioned next year.

Beauly-Denny replacement electricity transmission line (SSE section Beauly to Wharry Burn): Following consultation, Ofgem has approved an asset value adjusting event submitted by Scottish Hydro Electric Transmission Ltd to recover additional forecast construction costs arising from the replacement of the line between Beauly and Wharry Burn, taking the allowed total to £539m (at 2009/10 prices). Full construction work on the replacement line is now getting under way, and the erection of the first of the new pylons is expected to take place in the next few weeks. The replacement line should be completed in 2014.

Northern electricity transmission upgrades (Knocknagael Substation, Beauly-Blackhillock-Kintore and Beauly-Dounreay): Ofgem has authorised pre-construction and construction funding for these three projects, which have a total value of almost £200m. The first project, the upgraded Knocknagael Substation, is on course to be completed early next year. Work on the remaining two projects is under way and they are on course for completion by 2015. They include installing an additional set of conductors on the Beauly-Dounreay overhead transmission line, on which work began earlier this month.

Aldbrough gas storage capacity (around 330mcm; SSE stake 66.6%): Six of the nine caverns are already storing gas. Leaching at the remaining three caverns has been completed. Testing has been completed on two of those remaining caverns, with de-watering through injection of gas due to start shortly, and testing is under way at the third. All three of the remaining caverns should be ready for operation by the summer of 2012.

Glendoe hydro electric schemeWork on the restoration of electricity generation at the Glendoe hydro electric scheme is continuing to progress well and investment is being made to ensure it is carried out to a very high design specification. Both of the two new tunnels required to by-pass the blockage in the existing tunnel, and thereby allow water to go from the reservoir to the power station, have been completed. Repair of the tailrace has also commenced. This means the process of re-filling the reservoir should begin around the end of this winter and electricity generation should resume in the first half of 2012.

Company nameIn November 2009, SSE announced its intention to change the name under which it is listed from ‘Scottish and Southern Energy plc, which reflects its geographical origins, to ‘SSE plc’, which reflects the name by which it is most commonly known. The change will take effect on 1 October 2011.

 Ian Marchant, Chief Executive of SSE, said:

 “This year has been characterised by volatile wholesale energy markets and rapidly-changing retail markets, which makes it all the more important that companies have a long-term view, focused on clear objectives. Our commitment to above-inflation dividend growth is as strong as ever, and I am pleased with the significant progress of our investment programme, the assets from which will help to sustain dividend growth in the years ahead.”

[mappress]

Source: sse, September 30, 2011