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SSE first-half profits hit by capacity payments delay

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By Reuters
SSE first-half profits hit by capacity payments delay
FILE PHOTO: An SSE company logo is seen on signage outside the Pitlochry Dam hydro electric power station in Pitlochry, Scotland, Britain, November 8, 2017. REUTERS/Russell Cheyne   -   Copyright  Russell Cheyne(Reuters)

(Reuters) – Utility SSE Plc <SSE.L> said on Thursday the contribution from its first-half profits to annual results would be significantly lower than previously expected after payments under Britain’s back-up power scheme were delayed.

A European Union court ruling last year forced Britain to halt payments under its capacity market scheme, which pays generators to be available during periods of high demand, pending a review by the European Commission.

SSE, one of Britain’s so-called Big Six energy firms, said the continuing suspension of the payments meant the company was unable to recognise pending payments totalling 148 million pounds.

The proportion of SSE’s first-half adjusted operating profit in 2019/20 is likely to be just one-fifth of the full year total, versus 35% the company typically books in, SSE said.

The European Commission launched the review of Britain’s capacity market scheme in February but industry experts have said this could take 12 months to complete.

Britain’s government has said it expects the scheme to be reinstated and that it will make retrospective payments to companies.

SSE also said profit at its electricity distribution business would decrease by 25 million pounds to 375 million pounds in the current year due to lower-than-expected volumes and a rise in network faults.

The company said it was making good progress in the planned sale of its gas production assets, which meant this business could be considered “held for sale” and in turn reduce adjusted earnings per share by up to 5 pence in the current year.

SSE currently expects its adjusted EPS for the year to be around 85-90 pence, higher than the 67.1 pence a share it reported in the comparable period.

“The key months of our financial year are still to come, and working to mitigate the economic, regulatory and political uncertainties arising from the Brexit process will continue to be a key priority for SSE,” the company said.

SSE earlier this month also announced plans to sell its retail arm to OVO Energy in a deal valuing the business around 500 million pounds.

(Reporting by Muvija M in Bengaluru , additional reporting by Susanna Twidale in London; Editing by Rashmi Aich and Jane Merriman)