Energy Company Attractive for Income Seekers

SSE's performance will hinge on three major factors: demand for renewables, electricity prices, and SSE's ability to earn its allowed returns at its regulated networks business

Andrew Bischof 17 December, 2014 | 4:37PM

SSE's (SSE) core business is its unregulated wholesale and retail segments, which together have historically accounted for about 60% of operating profits. The company's regulated networks segment, which makes up electric and gas distribution and transmission services, provides more stable earnings. Rounding out the company's earnings profile are its smaller noncore operations.

The company's wholesale generation unit operates roughly 12 gigawatts of primarily thermal capacity in the U.K., though its portfolio of hydro, wind, and other renewable-generation assets is expanding because of aggressive U.K. renewable portfolio standards to be implemented by 2020.

SSE projects renewable generation will account for 40% of its portfolio by 2025. The growth of its wind portfolio would improve returns dramatically if power prices were to recover, though at present the economics of wind power generation are largely supported by the government's incentive program.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
SSE PLC1,145.00 GBX-5.61

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Andrew Bischof  

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