UK energy company SSE on Thursday said market conditions continued to be challenging for the company and pointed to some uncertainty about the future operations of some of its power generation assets and also its investment in certain renewables projects.
In a nine-month trading update, SSE said that it would cut by 5.3% its household gas price from the end of March, a move welcomed by UK Energy and Climate Change Secretary Amber Rudd, who also urged other suppliers to follow suit.
"The government is ... increasing competition in the energy market," Rudd said.
SSE CEO Alistair Phillips-Davies said market conditions "continue to be challenging" as SSE raised a question mark over the future of some power generating plants.
It said that in the December 2015 UK capacity auction, it secured agreements to provide a total of 3,150 MW of de-rated capacity from October 2019 to September 2020 at a price of GBP18/KW.
But, "this means de-rated SSE capacity totalling 2,972 MW did not secure an agreement, including the Peterhead and Fiddler's Ferry power stations," it said.
"Since the result of the capacity auction, SSE has been analyzing market conditions and options for the future operation of power generating plant and expects to complete that analysis and reach conclusions shortly," it said.
ASSET DISPOSAL, RENEWABLES
SSE said it would also continue its disposal program for assets that "are not core to its future plans, [resulting] in a disproportionate financial burden or which could release capital for future investments."
The disposal of assets is taken into account in SSE's total expected net capital and investment expenditure of GBP5.5 billion across the four years to March 2018.
"Proceeds and debt reduction from these planned and completed disposals are expected to result in a financial benefit in excess of GBP1 billion and to date disposals with a total value of around GBP650 million have been completed or agreed," it said.
SSE also pointed out changes in its plans for renewable energy projects after the UK government cut incentives to the sector in 2015.
"The closure of the Renewables Obligation for new onshore wind projects from March 2016 will affect SSE's remaining onshore wind development pipeline," it said.
It added, however, that given the allowed grace period, it expected to build around 400 MW of onshore renewable energy under the RO.
But two wind projects -- Stronelairg (up to 240 MW) and Strathy South (up to 133c MW) -- continue to have "significant uncertainties associated with their development timelines."
In December, a UK court quashed the consent for the Stronelairg wind farm. SSE is appealing the decision alongside the Scottish government.
Strathy South, meanwhile, does not have a final planning decision and may not qualify for the RO grace period.
"SSE will engage with the UK government regarding future possibilities for these projects as policy develops," it said.
PETERHEAD CCS
SSE also said that following the UK government's decision in December to no longer fund a carbon capture and storage demonstration project, it was "unlikely" to proceed further with the proposed project at the gas-fired Peterhead power station.
It said it recently completed investment to enable the 400 MW of capacity at Peterhead to operate commercially -- a total of 1,135 MW.
SSE has also returned its gas-fired power station at Keadby (735 MW) from "deep mothball" to full commercial operations since the start of the winter.
SSE said total electricity output in the first nine months of 2015 from gas-fired power stations was 6.6 TWh, compared with 7.5 TWh in the same period of 2014.
Output from coal-fired power stations was 3.7 TWh, down from 5.1 TWh, while output from renewable sources was 6.8 TWh, up from 5.6 TWh.
