SSE to Sell Power Assets, Split Retail From Wholesale UnitNidaa Bakhsh
SSE Plc will freeze power and gas prices, legally split its retail and wholesale units, and sell assets as the U.K.’s second-largest energy supplier moves to head off government action against the “Big Six” utilities.
SSE plans to dispose of 1 billion pounds ($1.7 billion) in assets over the next two years, the Perth, Scotland-based company said in a statement today. It also plans to cut about 500 jobs as part of annual savings of about 100 million pounds by March 2016, it said.
Utilities have been criticized for raising prices faster than inflation, inflaming political debate over living costs. Prime Minister David Cameron’s government last year pledged to make it easier for customers to switch companies, while the Labour opposition vowed to freeze charges should it win 2015 elections. Regulator Ofgem said it will publish a report tomorrow on the state of competition in the market.
“There’s been this political machination in a big way since last year, and SSE have grabbed the bull by the horns,” Angelos Anastasiou, a utilities analyst at Whitman Howard in London, said by phone. “They’ve pre-empted a lot of the potential Ofgem findings and recommendations.”
Cameron told lawmakers in Parliament today that SSE’s price promise was “hugely welcome.” Labour leader Ed Miliband called Cameron a “PR man for the energy companies.”
SSE shares rose 1.3 percent to 1,518 pence at the close in London trading, valuing the company at 14.7 billion pounds. It was the second-best performer on the Stoxx 600 Utilities Index.
Ofgem’s assessment may result in Britain’s Big Six suppliers being referred to the Competition and Markets Authority and a possible breakup of their operations. The evaluation adds to speculation of an industry overhaul after Energy Secretary Ed Davey last month floated the possible breakup of Centrica Plc’s British Gas unit and asked the regulator to investigate whether the company was profiting from excessive tariffs.
The price freeze “shows that the government’s work to reduce energy bills is working by lowering policy costs and driving competition,” Davey said in a statement.
The company will freeze prices until at least January 2016, it said today.
“We’re setting out a positive agenda for customers,” SSE’s Chief Executive Officer Alistair Phillips-Davies said in the statement. “We’re making clear we wish to work with people to find more ways of taking costs out of energy bills.”
Utilities have blamed rising prices on natural-gas costs, levies to pay for clean energy and regulations requiring they reduce carbon emissions. A month ago, Ofgem asked the utilities to publish prices for wholesale power as much as two years in advance to improve transparency.
SSE has decided not to proceed with the development of two onshore wind farms because they’re no longer economically viable, it said.