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SSE admits 'big six' merger now in doubt

A merger between two of Britain's "big six" energy firms has been thrown into doubt after SSE (LSE: SSE.L - news) said there was "now some uncertainty" over the deal.

It comes as the energy giant reported deepening half-year losses at its household supply arm and a continuing customer exodus.

FTSE 100-listed SSE is planning to spin off this part of its business in a tie-up with rival npower and concentrate on its generation and distribution operations.

However, last week it revealed the merger had been delayed after regulator Ofgem set out plans for a price cap - prompting the terms of the deal to be reconsidered.

SSE said an update on the discussions would be disclosed by mid-December.

But it added: "There is now some uncertainty as to whether this transaction can be completed, as originally contemplated.

"Nevertheless, the board believes that the best future for SSE energy services, including its customers and employees, will continue to lie outside the SSE group."

The prospect for the merged business were further clouded on Wednesday as Germany's E.On - which under the spin-off plans would have a 34% stake in the new UK energy firm - said it would have "no strategic interest" in holding onto that stake.

E.On, which already operates one of the big six UK energy suppliers, is in the process of acquiring network and retail assets from German rival Innogy, which currently owns npower.

SSE reported a loss of £68.7m for its household supply arm for the six months to the end of September, up from £17.8m last year.

It blamed lower demand, higher energy costs and the decision not to further raise tariffs. At the same time, customer account numbers fell by 460,000 to 6.48 million.

SSE also warned profit margins would continue to fall in the business due to the price cap - confirmed by Ofgem earlier this month.

It comes a day after npower also reported falling customer numbers in the UK and warned it was set to make a loss for the fourth year in a row.