UPDATE:Scottish&Southern: On Track For 2010/11 Dividend Target

22nd Jul 2010 08:42

(Adds analyst comment, detail.) By Selina Williams Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. power utility Scottish and Southern Energy PLC (SSE.LN) said Thursday it was on track to deliver its dividend target in the 2010/2011 financial year, despite a drop in renewable energy output due to weather conditions, and to deliver its dividend growth targets in the years ahead. Renewable energy output, including conventional hydro electric schemes, wind farms and dedicated biomass plant, fell to 700 gigawatt hours in the three months to June 30, versus 1,000 gigawatt hours in the same period a year ago, the company said in an interim management statement. "The last few months have been marked by unusually low output of renewable energy and increases in wholesale gas prices," SSE Chief Executive Ian Marchant said. "In this challenging environment, we have achieved solid progress across our main operations and investment projects, which means we remain on course to deliver our dividend growth target for the year of at least 2% more than inflation." SSE didn't give guidance on profitability for the full year. In its last earnings statement, SSE had set a dividend target of an increase of at least 2% more than inflation in each of the three years to 2013, with sustained real growth thereafter. Separately, the company reiterated that it was not seeking to acquire any substantial ownership interest in the low-voltage electricity distribution networks currently owned by Electricite de France SA (EDF.FR). In June, SSE said it had decided not to seek to acquire an ownership interest in the networks on a scale that would need to be funded by a share issue, but it would continue to work with Canada's Borealis Insfrastructure on the sale process, which could result in SSE having a small ownership interest in the networks. EDF is selling its three U.K. low-voltage distribution grids as part of a plan to reduce its debt. The company said the number of electricity and gas supply customer accounts in the energy markets in Great Britain and Ireland increased by 100,000 to 9.45 million, retaining its position as the U.K.'s second-largest energy supplier by customer. Including home services, SSE's total customer base is now 9.87 million, up from 9.5 million a year ago. SSE said a cumulative total of around GBP1.3 billion has been invested by SSE in assets which were still largely under construction at June 30, 2010, and therefore have yet to make any substantive contribution to earnings. This includes more than 950 megawatts of on- and offshore wind farm capacity currently under construction. JP Morgan Cazenove said in a research note that the statement from SSE was mixed. "Our initial impression is that this statement is marginally negative," analyst Edmund Reid said in the note. "The large reduction in renewable energy is significant, as it is so high margin. We estimate that the reduction in renewable output would reduce PBT [profit before tax] by around GBP20 million to GBP30 million. The increase in thermal generation will only partially mitigate this as thermal generation margins are so much lower than renewable." At 0728 GMT, SSE shares were down 0.7% at 1156 pence a share. Company Web site: http://www.scottish-southern.co.uk -By Selina Williams, Dow Jones Newswires +44 207 842 9262; [email protected] (END) Dow Jones Newswires July 22, 2010 03:42 ET (07:42 GMT)