SSE warns over uncertainty linked to UK energy cap and timing of Npower merger

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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.

The company said it was expecting a year of “major transition and change” for the group, 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 a market announcement.

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.

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 2017/2018, 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 2016/2017, 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 SSE was in a good position to report earnings that were ahead of expectations at the start of the current financial year.

“The challenges are not expected to relent in 2018/19, and it will be a year of major transition and change for SSE,” Mr Alexander added.

“Throughout the year, we will retain our strong operational and investment focus, while preparing the businesses in the SSE group for the important developments that lie ahead”

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