SSE: £100m profit is vindication of Airtricity deal

Published Date: 13 November 2008
By Hamish Rutherford

SCOTTISH & Southern Energy yesterday maintained that its controversial acquisition of Airtricity had been vindicated after revealing it made a £100 million profit on the sale of half of an uncompleted wind farm it owned for less than eight months.
The Perth-based utility faced downgrades from analysts and credit rating agencies after announcing it was paying £1.1 billion for the Irish wind farm developer in January.But chief executive Ian Marchant told The Scotsman yesterday that the profit from the sale would vindicate SSE's move for Airtricity..Marchant said: "We said to the market at the time, 'you will in hindsight judge this as a good deal', and events since have vindicated us."SSE announced last week that it had sold a 50 per cent stake in the Thames Estuary Greater Gabbard wind farm to German utility RWE, for £308m. When it announced the sale to RWE last week the company was unable to give details ahead of its half-year results, but yesterday revealed that its profit on the sale of the stake was about £100m.SSE acquired 50 per cent of Greater Gabbard when it bought Airtricity. It paid £40m to acquire the rest of the project from US engineering company Fluor in April, but, excluding working capital, said it had sold that stake for £140m to RWE. Marchant added: "To buy something in April and sell it for £140m in November is good business."SSE, which this week became Scotland's largest company by market capitalisation after overtaking RBS, revealed its pre-tax profits in the six months to 30 September had fallen 55 per cent to £302.6m, on turnover of £9.2 billion.Marchant blamed the fall in profits on higher wholesale energy prices, but said the performance in the second half was expected to be much stronger, with full-year profits expected to exceed the £1.08bn reported for the year to 31 March. The news sent SSE shares up 55p, or 4.8 per cent, to 1,199p, valuing the firm at £10.5bn, compared with RBS's £9.3bn market cap.Despite maintaining that the company was in a strong financial position, Marchant admitted that it had never been so difficult to raise debt, after struggling to sell £500m in bonds to investors. Finance director Gregor Alexander spent most of last week calling potential investors to plug SSE's strength. Marchant said the bond issue was ultimately oversubscribed, but warned other companies may not be as fortunate."I think if it's this hard for a company as strong as SSE to raise debt, then for some good-quality companies it's going to be almost impossible."WHAT'S NEXTSCOTTISH & Southern Energy continues to attract new gas and electricity customers with chief executive Ian Marchant harbouring ambitions to be the UK's largest utility.SSE said yesterday that it had almost nine million gas and electricity customers, a net gain of 450,000 accounts since the start of April. SSE has consistently been the fastest-growing UK utility retailer, with customer numbers roughly doubling since the start of 2002.Last year SSE overtook EOn, the UK business of the German power giant, when its account numbers exceeded 8.2 million, making its Britain's second largest utility retailer by customers.Market leader Centrica, which owns British Gas, is streets ahead, with more than 15 million customers, but Marchant believes SSE could take the top spot."I would love to (pass Centrica] but it will take a while, it won't happen next year … I would love to do it before I retire," the 47-year-old said yesterday.