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SSE has booked a £489.1m exceptional charge against its household energy supply business in Britain, which it is in the process of selling to rival Ovo, as the unit continued to lose customers in the first half of its financial year.
The FTSE 100 company said SSE Energy Services, as the retail business is formally known, had total customers of 6.15m in Britain as of September 30, down from 6.48m at the same point in 2018.
The business made a £496.5m operating loss in the group’s first half, up from a £62.1m loss year earlier, although the lion’s share — £489.1m — of this was an exceptional charge to reflect “the transaction price agreed with Ovo” and other costs such as fees associated with completing the deal. This is expected to occur early next year if UK competition authorities decide not to launch an in-depth investigation.
Ovo, one of the newer “challenger” energy suppliers in the UK market, in September agreed to buy SSE Energy Services in a deal valued at £500m. Analysts pointed out at the time that the sale price compared to a book value of £764m.
SSE had been trying to offload the business after a previous agreement with rival energy supplier Npower had fallen through at the end of 2018.
The biggest energy suppliers in Britain have suffered a tumultuous few years as new competitors with lower cost bases have flooded the market, offering cheaper deals to customers, while the UK government this year also imposed a wide-ranging price cap.
Results for the retail business were stripped out of SSE’s wider performance as it posted results for the six months to September 30 on Wednesday.
The company also owns energy networks and power generation and was recently one of the main winners in a UK government auction for contracts to build vast new wind farms off the coast of Britain. It also owns gas production assets, although these are also up for sale.
Stripping out assets marked for sale, SSE posted a £128.9m pre-tax profit for the first half, a turnround from a £284.6m loss a year earlier.
SSE and other companies that are contracted to provide back-up power in Britain during the winter months recently received a boost when a UK government subsidy scheme, which had been frozen following a legal challenge, was reinstated, allowing associated payments to be made.
While SSE has managed to find a solution for the retail business, other parts of the group also face potential threats as the UK opposition Labour Party has said it intends to renationalise energy networks if it gains power.
SSE acknowledged the threat from Labour in its results on Wednesday, saying that the UK energy sector “continues to face a complex and challenging operating environment”.
“This is illustrated by the uncertainty arising from the UK general election, the Labour Party campaign for sector nationalisation and public policy outcomes becoming the subject of judicial processes,” the company said, adding: “Each of these matters has to be dealt with in a pragmatic and progressive way, guided by the concerns of shareholders and other stakeholders and underpinned by a commitment to do the right thing in the fight against climate change.”
Alistair Phillips-Davies, SSE’s chief executive, used the results to urge the UK government to press ahead with further renewable energy projects in order to meet a target to reduce emissions to “net zero” by 2050, including lifting a ban on new onshore wind projects.
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