Southern Electric, North Sea Gas And Hess Energy

Southern Electric is a trading name of the Scottish and Southern Energy Group of which SSE Energy Supply Limited is a member

Scottish & Southern Energy (Southern Electric SSE) is to buy almost 80% of the North Sea gas assets from Hess for $324 (£290m) after the US company partners exercised their right to acquire the remaining 20%. At the moment, SSE is one of the Big Six suppliers and agreed an outline deal worth $423m with Hess saying that it expected the partners to take some of the original 383bn cubic feet (35.6bn cubic metres) of the available gas and liquid resources. The remainder of the gas will supply around 6% of the amount SSE needs to supply its customers and fuel (presumably gas fired) electricity-generating power stations. Such moves are made to hedge its exposure to volatile wholesale gas prices.

• This logic suggests that it can maximise profits by protecting itself against upward price moves while at the same time failing to pass on any reductions to the consumer. Nothing new there. But this does illustrate the possible deceit in its 'justifications': to the consumer.

Southern Electric
Southern Electric - The Deceit
Southern Electric - The Letter
Southern Electric - Update

However, a promising energy future is potentially likely when considering any Big Six break-up and competition working in favour of the consumer:

Smaller Energy Players Challenge Tariffs of ‘Big Six’

Energy supply director of SSE (Alistair Philips-Davies):

• "We are very pleased with the assets which we can now go ahead and acquire. For a fair price, we will secure a new source of primary fuel and a hedge for our gas generation and supply activities, taking a very useful first step into the upstream gas sector."

Credit Suisse (Investment Banking) analysts said that the SSE strategy should be regarded as "positive". But this fails to communicate if the shareholder or consumer is indicated.