SSE warns on uncertainties over price cap in coming year

● Scots utility firm unsure on timing of Npower tie-up ● Says expects EPS of just over 120p for 2017-18 fiscal year

Energy supplier SSE has warned over the impact of a UK energy cap and said the timing of a household operations merger with Npower is still unclear, in a market update yesterday.

The Perth-based utility said it was expecting a year of “major transition and change”, adding that the uncertainty could have a “potential impact on adjusted earnings per share” in the new financial year.

That is due in part to plans that will see it hive off its UK household supply and services business, which will be merged with Npower’s operations to create a new domestic energy firm – turning the Big Six energy suppliers into five.

But the deal, which was reached with Npower’s German parent Innogy in November, prompted an investigation by the Competition and Markets Authority in late February.

“The planned demerger of SSE’S GB household energy supply and services business remains on course but its timing, if approved, is not certain,” SSE company said in its update.

SSE said the inquiry had a statutory deadline of 40 working days, but the company was already preparing for the planned merger which will see some 8,000 employees transferred to the new retail group.

“Furthermore, within 201819, the impact and timing of the Domestic Gas and Electricity (Tariff ) Cap Bill, if enacted, is unclear,” SSE added.

Britain’s Big Six are braced for a raft of regulatory changes after the government announced last year that a price cap will be imposed on poor-value energy tariffs.

SSE said it was expecting to report adjusted earnings per share of just over 120p for 2017-18, with adjusted operating profit from its wholesale division set to be “significantly higher” than a year earlier, thanks to increased output from its renewable and gasfired generating plant.

But profits from its networks unit are expected to be £150 million lower than in 2016-17, while its retail division will be broadly in line with the previous year.

SSE finance director Greg Alexander said: “As expected, 2017-18 has involved a number of significant challenges, but SSE is a robust, sustainable business that has kept its strong operational focus on meeting the needs of customers.”

He assured that its focus on “efficient investment” meant it was in a good position to report earnings that were ahead of expectations at the start of the current fiscal year. Billy Walker, the master distiller who last year led the purchase of the Glenallachie Distillery near Aberlour in Speyside, is releasing a special bottling of limited edition whiskies as his first product launch from the site. Having sampled an extensive selection of the distillery’s 40,000 casks, Walker has identified six casks that have been bottled to mark the 50th anniversary of the distillery’s maiden production run in 1968. The distillery has four stills and two spirit safes.