SSE loses 160,000 energy customers and issues profit warning
Big Six supplier to cosider selling retail business
SSE has issued a profit warning after a sharp drop in customer numbers. The Big Six energy provider pointed to intense competition as it revealed 160,000 households and businesses had closed their accounts in the last three months of 2018.
SSE now has fewer than 6 million customers and said it would look into spinning off its retail business.
The company also warned earnings would be below previous forecasts, partly due to a European court ruling on subsidies that is expected to cut SSE’s income by about £60m.
Large utility companies have been buffetted by rising wholesale prices and a new default energy tariff price cap which they complained was set too low.
Just weeks after the cap was introduced earlier this year, energy regulator Ofgem announced it would be raised, in a move expected to cost an average UK household £117 extra per year.
SSE blamed the cap and “challenging market conditions” for the collapse of its proposed merger with rival Npower in November; a tie-up that would have reduced the Big Six to the Big Five.
The companies said the viability of that deal was hurt by multiple factors, including the performance of their businesses and lack of clarity about the tariff cap.
Earnings per share in 2019 will be 6p lower than previously expected, SSE said.
George Salmon, equity analyst at Hargreaves Lansdown, said there were “lingering doubts” about SSE’s future.
“The dividend looks OK for now, but only because it was cut in advance of the planned departure of the retail business. Npower ended up walking away from that deal, citing concerns over heightened regulation, but the longer-term plan is still to separate the business.
“Once the valuable retail cashflows are removed, the pressure will be on the group’s renewable assets to deliver. As we’ve seen this year, that’s no formality. With credit ratings being cut, tighter regulation in the networks business looming and debts approaching £10bn, the dividend policy could yet need another look.”