Stiffer competition and falling customer numbers short-circuit SSE Airtricity's profits

The company is one of the biggest electricity providers to Irish households.

By Paul O'Donoghue Reporter, Fora

PROFITS DROPPED SHARPLY at electricity provider SSE Airtricity last year as the company struggled to deal with intense competition.

New corporate filings show the power supplier made a full-year profit of €13.4 million in the 12 months to the end of March – down from its near-€33 million return in 2015.

SSE’s directors report said that the company’s performance “reflects various factors, including a tariff reduction from April 2015 and a decrease in customer numbers due to increased competitor activity in the Republic of Ireland domestic market”.

At the end of the period, SSE Airtricity was the second-largest electricity provider in Ireland for domestic customers. However, it saw its customer number fall by 1.5% during the year to just under 310,000.

SSE, which is owned by London-listed Scottish firm SSE plc, has come under pressure from rivals such as Bord Gáis Energy, which moved to cut electricity bills.

The electricity market continued to be competitive throughout 2016, with Electric Ireland, the largest player in the Irish residential market, announcing a major price cut.

Overall, Irish consumers still tend to pay high prices for their electricity compared to their European neighbours.

Rising costs

The accounts for SSE show that its turnover rose slightly during the year to the end of March, increasing from €853 million to €877 million.

However, its cost of sales also rose significantly, jumping from €765 million to €817 million. After administrative expenses of €43.4 million were included, the company made an operating profit of €16.1 million. This was down from the €40 million recorded the year before.

The number of people employed by the company dropped from 415 to 369 during the period, although staff costs were only down slightly.

The directors noted that when the impact of “derivative instruments” was removed, SSE Airtricity made a full-year profit of €36.9 million, down from €41.5 million the year before.

Derivative instruments are contracts that derive their value from the performance of an underlying entity. The report did not state what the derivative instruments take their value from.