A new cap on energy prices is putting a spanner in the works for energy provider SSE (SSE) after revealing its proposed merger with npower is likely to be delayed.
In an announcement released after the UK stock market closed on Thursday, SSE says it is considering ‘potential changes’ to the commercial terms of its merger and re-listing on the Main Market.
Other recent developments have been blamed, including npower’s requirements to post collateral against its credit exposure and its ability to obtain and retain an ‘appropriate’ credit rating.
Shares in SSE have dimmed 3.2% to £11.45 on the news.
WHEN CAN INVESTORS EXPECT AN UPDATE?
Completion of the merger is expected to be delayed beyond the first quarter of 2019.
There is unlikely to be any further on progress until mid-December at the earliest.
SSE hopes changing its terms with npower will help mitigate the impact of tighter regulation by the UK government to tackle rising energy prices.
The company’s recent profit warning shocked the market as the summer heatwave suppressed use and impacted output from wind farms and hydro-electric stations.
High wholesale gas prices also played a part, with the headwinds wiping £190m off operating profits so far this year.
For investors, one of the biggest appeals of investing in SSE is its generous dividend.
The company currently yields more than 8% based on consensus forecasts for the March 2019 financial year, which suggests investors have some concern about the sustainability of the dividend.
