Scottish and Southern Energy has delayed a Welsh power plant project because of a fall in UK demand thanks to the downturn.
The company met expectations with a 3% rise in full year pretax profits to £1.29bn, but a cautious outlook has seen its shares fall 33p to £10.68. SSE said it planned to start operating the Abernedd gas-fired power station in South Wales two years later than planned.
Analysts believe the company might also need a cash call if its consortium succeeds in buying EDF's three distribution businesses which are currently thought to be up for sale. Commenting on the results and the prospective acquisition, Ambrian analyst Angelos Anastasiou said:
Scottish & Southern Energy's results seem pretty much in line with expectations. However, while pretax profit and earnings per share growth of 3% and 2% respectively are much as expected, these relatively low figures reinforce the thinking that SSE is spending a lot of money (capex of £1.32bn in 2009/10 following £1.28bn in 2008/09) for not much growth. Although the shares now look relatively cheap, with upside of 18%% to our target price of 1,303p, we believe that investors will remain wary of the potential need of a fund raising, and will also be disappointed by the modest earnings per share growth profile (given the ratcheting up of the capex).
SSE has teamed up with Canadian infrastructure fund Borealis for its bid for EDF's three electricity distribution companies. If SSE's consortium bid were to succeed, we believe that some form of fund raising (rights issue?) would be inevitable, and we believe that some extra cash might be raised to relieve pressure on the group's finances.
