SSE plc (LON:SSE), the power firm which is looking to merge its UK retail division with Innogy’s npower, said on Wednesday that it is looking to create a new company that will include its renewable energy assets in the UK and Ireland as it confirmed a big drop in first-half profit.
The FTSE 100-listed firm said the new company – to be known as SSE Renewables, – will comprise around 4 gigawatts of SSE’s existing renewable assets such as hydropower, onshore wind and several stakes in offshore wind projects.
READ: SSE merger with Npower hangs in the balance as parties renegotiate terms
The group said the new entity will provide greater visibility of assets and future earnings for investors and improve its ability to raise finance for projects.
The spin-off plans came as SSE reported an almost 41% slump in adjusted pre-tax profits to £246.4mln for the six months to September 30, down from £416.7mln a year earlier, as operating profits at its Wholesale business plunged by 98%, while retail profits dropped by 13%.
In September, the energy company had warned that its profits would be hit as calm weather cut renewable output and a summer heatwave curbed demand.
Alastair Phillips-Davies commented: “The operating environment for energy companies is likely to remain complex and challenging. SSE is taking decisive action to deal with all of the key issues and making material progress in its core businesses of regulated energy networks and renewables.”
In spite of the profit slump, SSE has raised its interim dividend by 3.2% to 29.3p per share and said intends to recommend a full-year dividend of 97.5p and to deliver the five-year dividend plan it set out in May 2018.
In early morning trading, investors took heart from the pay-out news, pushing SSE shares 1% higher to 1,142.50p.
Some uncertainty over npower tie-up
Commenting on its plans to merge its UK retail division with npower, SEE said: “There is now some uncertainty as to whether this transaction can be completed as originally contemplated.”
It added: “The Board believes that the best future for SSE Energy Services … will continue to lie outside the SSE group.”
Earlier this month, the two companies said the tie-up would be delayed beyond the first quarter of 2019 due to market developments such as the looming implementation of a price cap by the UK energy regulator Ofgem from January 1.