Energyfirm SSE ready for ‘year of transition’

Perth-based company is due to merge household operations with Npower

Perth-based energy supplier SSE has warned over the impact of a UK energy cap and said the timing of a merger with Npower is still unclear.

The company 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 said in a market announcement yesterday.

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

“Furthermore, within 2018/19, 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 gas-fired 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.”

SSE’s shares fell 18p to close at 1,276p.

Pictures: Katielee Arrowsmith/Newsteam/ PA. Top: SSE’s Perth headquarters. Above: the power company said profits from its network unit would be £150m lower this year.