SSE blames EU for lower profits

Energy giant SSE on Friday warned on profits, blaming an EU ruling which left it without extra cash from the UK Government.

Last November, the EU forced Britain to stop payments under its capacity market scheme, whereby the government pays energy firms extra money to make sure there is enough electricity during times of high demand.

Although the EU had previously approved the scheme back in 2014, it reversed its decision, saying it is an illegal form of state aid.

The surprise ruling has left SSE £60 million out of pocket this financial year, the company said on Friday, and it will dent profits by up to 15%.

The Scotland-based business, which sponsors the Women’s FA Cup, said it expected earnings per share to be between 64p and 69p, down from forecasts of 75p before the court decision in November. It achieved earnings of 121p per share last year.

Big energy suppliers have struggled with competition from smaller rivals, which often offer cheaper prices. SSE lost a further 160,000 customers in the quarter to December 31, leaving it with 5.8 million accounts.

It added that management was still weighing what to do with its domestic supply business, after SSE last year walked away from merging its retail arm with German rival Npower’s. The deal would have created Britain’s second-biggest energy supplier, but SSE said in December that it was no longer in the best interest of customers, employees or shareholders.

The options at present on the table are separating the retail business and listing it on the stock market, a sale or another transaction.

SSE expects to have an update by the end of March, with chief executive Alistair Phillips-Davies adding it was making “good progress” on deciding what to do with it. Shares fell 23.5p, or 2%, to 1150p.