SSE expected to announce profit drop as Npower merger hits snag
Big Six energy company SSE is expected to announce a 43 per cent drop in profit for the first half of the year in its results on Wednesday.
On Thursday SSE said the anticipated merger of SSE Energy Services with Npower would be delayed beyond the first quarter of 2019 in order to renegotiate commercial terms.
SSE’s shares fell 2.5 per cent on Friday following the news.
According to estimates from S&P Global Market Intelligence, SSE is expected to report earnings before interest of £333.3m for the six months to 30 September, compared to £586m in the same period last year.
Earnings before tax is expected to fall 63 per cent from £409.6m to £151m.
In September SSE issued a trading statement warning its operating profit in the first half could be 50 per cent lower than the previous year.
It said dry, still and warm weather and high gas prices had led to higher cost of energy, lower than expected renewable energy output and lower volumes of energy consumed.
The delay to the proposed merger of SSE’s retail division with Npower, which is owned by Germany’s Innogy, was blamed on recent market developments which SSE said meant the commercial terms of the original deal needed to be reconsidered.
SSE said the developments include the potential impact of the recently announced energy price cap on the new company’s requirement to post collateral against its credit exposure and to obtain and retain an appropriate credit rating.
SSE said potential changes to the terms of the deal would help mitigate the impact.
The UK’s competition watchdog had cleared the merger in October.
Innogy’s retail chief operating officer Martin Herrman last week blamed the energy price cap and adverse market conditions for the delay, but said the pair still saw the benefits of the deal.
He said the changes to the terms could include the pair putting more money into the new company, either directly or indirectly.
The newly merged firm had been expected to list on the London Stock Exchange.