Energy giant's profits up despite power cut

The UK's second biggest energy firm, which owns Ferrybridge coal-fired power station in West Yorkshire, said average energy use by its household customers had fallen in each of the previous three years, despite progressively colder winters.

SSE, which has 9.16m customers, said it will match the 2.9 per cent increase in adjusted pre-tax profits for the year to the end of March with dividend hikes for shareholders of at least two per cent above inflation for the next three years.

However, the group said the demand environment is likely to remain tough. A recent government report showed that in the UK in 2009 final consumption of electricity fell by 6.8 per cent on a year earlier, with domestic use down by 3.2 per cent.

Figures also showed demand for gas was 7.7 per cent lower, with domestic consumption down 5.4 per cent.

"We don't see the next 12 months being much different from the past 24 to be honest," said chief executive Ian Marchant.

"Underlying demand has stopped falling for industrial customers but for domestic customers it's still coming down because of the energy efficiency effect, not because of the economy."

SSE revealed it will delay building a new gas-fired power plant in South Wales by two years because of lower demand.

However, SSE said it will continue investment in Ferrybridge as it seeks to demonstrate new lower-carbon technology.

Last month, the group was given go-ahead to develop a five-megawatt carbon capture test plant at Ferrybridge.

The 21m project aims to demonstrate the viability of capturing harmful carbon emissions.

The group said the project, the largest of its kind in the UK, is significant because it bridges the gap between laboratory trials and the bigger pilot schemes the government wants to see. The trial will start in 2011 and run to the end of 2012.

Early in 2009, SSE also fitted flue gas desulphurisation equipment to half of Ferrybridge's capacity. This technology also allows it to burn coal with higher sulphur content, and a year ago SSE signed a deal for Doncaster mining group UK Coal to supply it with 3.5m tonnes of coal until 2015.

The firm also wants to build a 350m combined heat and power (CHP) plant at Ferrybridge, which would burn fuel, including biomass and waste, generating 108MW of electricity. It has submitted a planning application for the site.

SSE said Ferrybridge and Fiddler's Ferry power station, in Cheshire, together increased output to 11.5 terawatt hours during the year, from 7.8 TWh a year earlier.

The group added it will continue investment in gas storage caverns at Aldbrough, in East Yorkshire. It is creating caverns 2km underground by leaching or dissolving salt deposits with sea water.

Aldbrough now provides 115 million cubic metres (mcm) of gas capacity in four caverns, and SSE expects to add a further 85mcm this financial year. It invested 26.6m in Aldbrough over the year.

Operating profits at SSE's generation and supply business jumped by more than 60m to 896m in the year to March 31, accounting for more than half of the group's overall operating profits.

The firm said that its "moderate" profit rise came after achieving a "better balance" between the wholesale cost of electricity and gas and the prices passed on to customers after protecting households from the biggest spikes in wholesale markets during the previous year.

Power plants put on hold

Slumping demand for energy, due to the downturn, has delayed construction of at least three new power plants, firms have said.

Scottish and Southern Energy has put off building an 870 megawatt (MW) gas-fired power plant in Wales because of the drop in demand.

E.ON UK has put off its 1,200MW Drakelow D gas plant in Staffordshire, which had been due to open in 2013, until it sees a sustained recovery in demand.

E.ON also shelved plans for its controversial Kingsnorth coal-fired power plant in Kent.

European energy demand showed some signs of recovery in early 2010 after sagging around seven per cent during the economic crisis.

In March, SSE said that it would probably shut an existing unit at its Peterhead power plant.