SCOTTISHPOWER has lost another 317,000 customers and seen the profits it makes from the supply of energy to households plunge but said it made sense to remain in the retail business.
The Glasgow-based energy giant saw customer numbers fall by six per cent last year, to 4.7 million amid what it described as fierce competition in the retail market.
The profits made by the division that includes its retail operations fell by around two thirds to £96.7m, from £271.8m last time. The introduction of the cap on energy prices by the UK Government and relatively mild winter weather posed challenges.
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However, chief executive Keith Anderson said: “It looks very tough right now, there’s lots of competition but our view is that we need to look beyond that and when we look out into the medium term, the long term we see a potentially huge market.”
The results cover a period during which ScottishPower’s giant rival SSE sold its retail arm to Ovo for £500 million after concluding it made more commercial sense to focus on power generation and associated networks.
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But Mr Anderson said ScottishPower’s performance during 2019 demonstrated the robustness of its end-to-end business model amid the drive to reduce carbon emissions to zero net of amounts absorbed.
The company’s activities include generating power, operating the networks that transport it and selling energy to householders and businesses.
ScottishPower is focused on renewable energy after selling its conventional power generating plants to Drax in a £700m deal in 2018.
Mr Anderson believes ScottishPower can win support from consumers by helping them feel that they are doing something to tackle climate change.
Last week the company introduced a guarantee that all the electricity it sells on fixed price deals will come from windfarms operated by the firm.
It expects to deepen relationships with existing customers and to add new ones by offering services that will help people to decarbonise the energy they use for transportation and heating in future. This will involve the firm investing in charging facilities and smart grids to encourage the shift to electric vehicles and supporting the adoption of heat pump technology.
Mr Anderson held out the prospect of the company offering a whole lot of additional services and products.
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The company expects to use the profits generated in the retail business to fund investment in developing renewable facilities.
It could build more windfarms in Scotland, with onshore and offshore developments in prospect. Onshore windfarms could be used to produce energy that would be supplied to companies that wanted to reduce their carbon footprints. In October ScottishPower announced plans to build two windfarms in Scotland that will provide clean energy for Tesco and Amazon.
Investment in the UK is likely to be maintained at the current annual rate of £1.5bn to £2bn over the next three or four years.
Mr Anderson said good progress is being made toward delivering on the plan to make Glasgow a net zero city in terms of carbon emissions. This was launched by ScottishPower and Glasgow City Council in May.
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He said there were lots of conversations going on and planning being done about subjects such as how to create an electric highway linking the city with Glasgow and Edinburgh airports and vehicle charging infrastructure.
The recent launch of electric bus and bicycle services in the city provided visible signs to people that things were starting to move.
Mr Anderson is confident that Glasgow will be ready to host the COP26 climate change conference in November in terms of charging infrastructure. This will be attended by politicians and activists from around the world and is likely to put huge demands on facilities.
“There’s a lot of commitment from the city, from us and from other companies and I’m absolutely sure we will all end up working together, doing stuff together, that we’re all focused on making COP a brilliant success for the city, a massive success for Scotland,” said Mr Anderson.
He thinks the preparation for the conference should help Glasgow make progress towards the net zero target while proving an example of how investments made in support of the energy transition could generate wider economic benefits.
ScottishPower’s total underlying profits fell by 8%, to £1.42bn in 2019, from £1.54bn in 2018.
The profits achieved by its renewables generation arm rose to £461m from £458m
The parent Iberdrola group highlighted a good performance by ScottishPower’s networks arm, which increased profits to £867m from £813m.
Iberdola group increased profits by 8% to €10.1bn (£8.5bn) It also has operations in the Americas and Australia.
The group said: “With record investment of over €10 billion planned in 2020, Iberdrola expects to post high single-digit growth in net profit, while keeping its financial strength and its increasing dividend policy.”
ScottishPower said the underlying earnings of its liberalised business fell due to the mild 2019 weather in comparison to 2018, which saw the ‘Beast from the East, and the adverse impact of the UK Government’s Price Cap. The disposal of the generation business to Drax also had a small impact.
The company’s retail operations make up the bulk of the liberalised business.
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