Renewable output shortfall, but no change to guidance after 1Q SSE has acknowledged challenges in 1Q20, but is of the opinion that the key months of the financial year lie ahead. Guidance has been maintained, and SSE has reiterated its commitment to pay an 80p dividend for FY20, and the dividend plan set out in May 2018. As we suggested in our preview last week, renewable output was lower than expected for a typical year, with a shortfall of 400GWh in 1Q20, c.4% of annual forecast output. Our estimates suggest that this is a revenue impact of c.£40m. It appears that SSE is of the opinion that it is too early in the year to revise the ‘around £525m’ EBIT guidance for the renewables business (our estimate £528m), but this is something to watched at the next trading update, scheduled for 26 September. Ofwat cost of equity update supports Ofgem’s direction of travel As expected, SSE highlighted the growth aspects of its RIIO T2 draft business plan, although no reference was made to SSE’s view that the cost of equity is 6.9% CPIH real, an estimate considerably above Ofgem’s working assumption of 4.8% CPIH real. Ofwat’s update this morning suggests a cost of equity of 4.21% for wholesale water/wastewater activities, something we suggest is supportive of Ofgem’s direction of travel on cost of equity. We maintain our view that SSE’s final business plan will need to see change in this respect. 70k account loss in retail; tough operating environment SSE’s retail business has lost a further 70k accounts in 1Q20, 1.2% of the total at March 2019. It is clear that retail continues to be a tough market. There was no update on progress to deliver a future for SSE Energy Services outside the SSE Group. Three projects eligible for CFD Allocation Round 3 SSE has three projects eligible for the CFD allocation round 3. These are Viking (onshore), Seagreen (offshore) and Dogger Bank (offshore), with total capacity of 3.1GW. SSE indicated that the auction is expected to take place in the coming weeks, but has provided no additional information.