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SSE Plans Reduced Renewables Spending Share as Favors Networks

May 22 (Bloomberg) -- SSE Plc plans to reduce its share of spending on renewable energy through March 2015 in favor of increased investment in its networks business, where rates for power and gas distribution and transmission are regulated.

Renewables will probably account for about 30 percent of capital expenditure for the period compared with the three years to March last year when it made up about 50 percent, the Perth, Scotland-based utility said today in a statement.

The U.K. is reshaping the way it incentivizes power generation through legislation before parliament with a system guaranteeing so-far unspecified prices for low-carbon power and paying plants for providing back-up electricity. Network businesses are regulated by watchdog Ofgem with price controls offering stable revenue flows.

“There is an undoubted switch with renewables reducing and regulating networks increasing,” Chief Executive Officer Ian Marchant said today on a conference call. “It’s more a natural evolution of our capital plan, than a reaction to policy,” he said, as the company completed larger wind projects and focused on smaller operations.

SSE spent 382.6 million pounds ($578 million), or 26 percent of its 1.49 billion-pound investment in the year to March, on renewables. That compares with 852.3 million pounds of a 1.71 billion-pound total spent in the previous year, SSE said.

“This means that, for the first year since 2007/08, renewable energy did not comprise the largest element of SSE’s capital and investment expenditure,” the U.K.’s second-biggest energy supplier said in the statement. Network spending surpassed it with 45.5 percent.

Biggest Proportion

Networks provide a “relatively stable revenue flow,” and are likely to require the biggest proportion of investment through March 2015, SSE said.

SSE already outlined plans to curb thermal generation capacity by about 2,000 megawatts and postponed investment in new gas plants until at least 2015 because of soaring costs for carbon emissions and uncertainty over the capacity market plan.

SSE plans to make a decision on its 504-megawatt Galloper offshore wind farm, a venture with RWE Npower Renewables, probably next year, Alistair Phillips-Davies, who becomes CEO when Marchant steps down in July, said on the call.

To contact the reporter on this story: Sally Bakewell in London at sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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