SSE Writes Down E&P Assets

SSE, a leading UK utility and generator, said May 25 in its annual results that it remains on track to unbundle its retail business and is extending a Northern Ireland gas network. Upstream profits increased but it booked a charge against its E&P assets.

Reported SSE profit after tax attributable to shareholders halved to £821.6mn ($1.1bn) in the 12-months ending March 2018, from £1.6bn in the year before. Adjusted profit before tax was down by 6% to £1,453.2m, and there were net exceptional charges of £213.3m.

Almost half of that (£104.7mn) is an impairment following a downgrade of 2P reserves in the Greater Laggan gas fields (UK West of Shetland) in which SSE has 20% equity, as well as Bacton field assets (UK North Sea). SSE net reserves at end-March 2018 are 33.8mn barrels of oil equivalent (mostly gas), down from 43mn boe one year earlier. A further charge of £53.3mn was booked against retail technology.

SSE and German firm Innogy announced November 8 2017 they would merge their UK energy retail businesses to be respectively 65.6% and 34.4% owned and to be listed on the London Stock Exchange. A UK competition authority enquiry will complete its probe into the planned merger no later than October 22 2018. SSE shareholders get a chance to approve or reject the deal on July 19.

The company said it plans £1.7bn capex in the current 2018/19 year and £1.2bn the following year. These include a new £350mn efficient, flexible gas-fired power station at Keadby 2 in Lincolnshire.

Adjusted profits from gas production increased by 29% to £34mn in 2017/18 thanks to higher prices, while the loss on gas storage operations was reduced by 50% to £6.5mn.

Following the closure of Centrica's Rough gas storage facility, SSE said it now holds around 40% of the UK's conventional underground gas storage capacity. It said: “If the market or regulatory signals are present, SSE's gas storage assets are well-placed to provide this service to energy users.”

SSE's 50% share in gas distributor Scotia Gas Networks (SGN) was reduced to 33% from October 2016. SSE said: “Good progress is also being made [by SGN] building a third distribution network in the west of Northern Ireland comprising some 700 km of new gas pipelines which will allow up to 40,000 customers to connect for the first time to mains natural gas.”