Scotland business

SSE admits 'some uncertainty' over merger with Npower

SSE sign Image copyright PA
Image caption Perth-based SSE has revealed it has been hit by widened losses for its household gas and electricity supplier

Energy firm SSE has admitted there is "some uncertainty" that its merger with rival Npower will go ahead.

The announcement comes after the companies delayed the tie-up due to the incoming energy bill price cap of £1,137 a year for "typical usage".

It means suppliers will have to cut the price of their default tariffs to the level of the cap or below it.

The SSE-Npower merger, which has been cleared by the regulator, would create the UK's second-biggest energy company.

However, Perth-based SSE has revealed it has been hit by widened losses for its household gas and electricity supplier.

It has also reported the loss of another 460,000 SSE customer accounts as competition takes its toll.

In its half-year results, SSE said: "There is now some uncertainty as to whether this transaction can be completed as originally contemplated.

"Nevertheless, the board believes that the best future for SSE energy services, including its customers and employees, will continue to lie outside the SSE group."

Image copyright Getty Images
Image caption The incoming energy price cap will mean suppliers having to cut the price of their default tariffs

The two firms had been hoping to seal the merger of their retail operations in the first quarter of 2019.

But they said talks over the new terms of the deal will take several weeks and will probably see the deal delayed beyond the first quarter.

They still insist, however, that work to complete the merger continues and they plan to update by mid-December.

SSE reported a 41% fall in underlying pre-tax profits to £246.4m, stripping out its energy services division.

On a bottom-line basis, SSE posted pre-tax losses of £265.3m for the six months to 30 September against profits of £409.3m a year earlier.

Its energy services arm, which is split out from the main numbers due to the Npower deal, saw operating losses widen to £62.1m from £7.1m a year ago.

Small suppliers

It said annual profit margins in the energy services arm was set to fall to between 2% and 3%, down from 6.8% in the previous year, due to the price cap and "competitive pressures".

"Margins are expected to be lower still in 2019/20," it added.

On Tuesday, Npower's German owner Innogy also reported falling customer numbers in the UK.

It said it has lost about 500,000 accounts this year and warned the supplier will make a loss for the fourth consecutive year.

SSE said suppliers were suffering amid competition from small suppliers as households switch to cheaper providers.

It said: "The market for energy and related services in Great Britain remains intensely competitive, with over 70 suppliers competing for customers and around three million customers switching their electricity provider in the six months to 30 September."

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