SSE said it would examine options for its retail arm following the collapse of a merger with rival Npower as the Perth-based utility giant trimmed its earnings outlook and talked up its green credentials today.
In a trading update, the group also pointed to competitive pressures as it saw the number of domestic energy accounts fall from 6.04 million at the end of September to 5.88 million in December.
The firm is considering a standalone demerger and listing, a sale or ring-fencing of its energy services division. It comes after SSE and Npower recently pulled plans to merge their retail businesses, blaming “challenging market conditions” and the UK government’s energy price cap.
SSE warned that earnings per share would be lower than previously expected, coming in at a range of 64p to 69p, down from earlier estimates of 70p to 75p.
The firm put this down to not being able to recognise income from the UK’s capacity market scheme following a court ruling.
Chief executive Alistair Phillips-Davies told investors: “We continue to make good progress in our core businesses of regulated energy networks and renewable energy, complemented by flexible thermal generation and business energy sales.
“We are also making progress in assessing the options for the future of the energy services business.
“SSE has a clear strategy and good long-term prospects for its high-quality core businesses and assets that contribute to the transition to a low-carbon economy and will support the creation of value and delivery of our dividend plan in the years to come.”
Since pulling the Npower tie-up, SSE has sold its stake in two Scottish wind farms for £635 million and disposed of half of its telecoms network business to Infracapital for up to £380m.
The group reiterated its intention to recommend a full-year dividend of 97.5p per share and to deliver on its five-year dividend plan set out last May.
Donald Brown, senior investment manager at Brewin Dolphin Scotland, said: “There’s a lot to be taken from SSE’s latest update.
“The future of SSE Energy Services remains unclear, but options include demerging and listing the business, a sale, or an alternative transaction. However, it’s difficult to see who might be interested in buying the business, which has been in decline for some time.”
He added: “While SSE expects to take a hit on earnings per share, meaning a sharp fall in expected earnings only three months after its previous forecast, the company’s £200m share buyback scheme will be good news for shareholders if it provides share-price support.
“Meantime, there will be relief at the commitment to the 97.5p per share final dividend.”