SSE warns shareholders of 'squeeze' on dividends

The energy utility company SSE has told investors that dividends will be squeezed over the next year.

The Perth-based firm expects to remain within the target range for payouts to shareholders, but at the lower end.

It foresees a complex set of issues reducing profits from its networks division by £100m during 2017-18.

These include lowered income from electricity transmission charges, and less income having sold a stake in its gas distribution network.

The company also pointed to the effect of "under-recovery" of income booked from previous years.

The SSE share price fell 2% in early trading following the market update.

New wind turbines

The company, which retails as Scottish Hydro, Southern Electric and Swalec, set out plans for investment next year which are in line with the current year, at £1.7bn.

It had previously said it was reviewing the future of its gas-fired power station in Peterhead.

A fifth of that capital spending will be on renewable energy, with earnings from new wind turbines helping to generate earnings by the end of this decade.

The current year's financial results are likely to be affected by a "disappointing" year for hydro and wind power, due to weather conditions.

But SSE has told investors it has offset that financially, partly through output from conventional thermal power stations.

Profits on its retail operations for the past year, to 31 March, are likely to be below the 2015-16 figure.

SSE recently announced it will be putting up the standard electricity tariff for British customers by 15% from 28 April, and gas prices by 8% in Northern Ireland.

Gregor Alexander, the SSE finance director, said: "We can expect additional challenges in the new financial year, but we are committed to delivering annual dividend growth that at least keeps pace with inflation, and to working towards ensuring that dividend cover remains within the expected range, albeit towards the bottom of it."