Perth-based energy giant SSE plc said on Wednesday “there is now some uncertainty” as to whether the merger of SSE’s retail unit with Innogy subsidiary Npower can be completed “as originally contemplated.”

SSE last year agreed to demerge its household energy and services business in Great Britain with Npower to form a new listed UK company. The merger would create Britain’s second-largest retail power provider.

But last week SSE said it was in talks with Germany’s Innogy about potential changes to the terms of the merger — after the UK’s regulator proposed a price cap on default energy bills.

Innogy said “adverse developments” in the UK retail market “and regulatory interventions such as the price cap have had a significant impact on the outlook for the combined retail company.”

As it announced results on Wednesday for the six months to September 30, SSE said: “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.”

SSE also announced it will consolidate “the development, operation and ownership” of all of its renewable energy assets in the UK and Ireland under a single entity called SSE Renewables.

SSE said the creation of SSE Renewables “is expected to result in the creation of more opportunities in different markets, and SSE has begun the process of early assessment of potential opportunities.”

On its half-year results, SSE said that excluding SSE Energy Services, which is “held for disposal,” adjusted profit before tax fell 40.9% to £246.4 million and reported loss before tax was £265.3 million.

SSE chairman Richard Gillingwater said: “Although our half-year results are slightly ahead of the position we set out in September, they fall well short of what we hoped to achieve at the start of the year.

“This is disappointing and regrettable, but important changes are now being made to the way SSE manages its exposure to energy commodities.

“The commercial terms of the proposed combination of SSE Energy Services and npower are the subject of ongoing discussions, and creating a new independent energy supplier remains our objective.

“The board believes that the best future for SSE Energy Services, including its customers and employees, lies outside the SSE group.

“Looking ahead, we are taking forward the strategy we set out in May to position SSE as a leading energy company in a low carbon world, with a focus on regulated networks and renewables, complemented by flexible thermal generation and business energy sales.

“Material progress is being achieved in these businesses, which make up most of the value in SSE.

“The 29.3 pence interim dividend that we have announced today is the first step in delivering our five-year dividend plan and paves the way for the 97.5 pence full-year dividend that we expect to recommend in May.

“This is a company with a clear strategy for its core businesses and highly valuable assets in a sector that’s yielding investment opportunities that go with the grain of political, economic and environmental focus on decarbonisation, and it is this that will support the delivery of our dividend plan in the years to come.”

SSE CEO Alistair Phillips-Davies said: “The creation of SSE Renewables is the latest step in our strategic goal to give greater focus to renewable energy, give investors greater visibility of assets and earnings in the future and give each of the businesses in SSE the best platform for success.

“Success will mean maximising SSE’s contribution to the ongoing decarbonisation of the electricity system and creating value for shareholders and society in a sustainable way, with a clear focus on maximising future growth opportunities.

“SSE has a unique portfolio of renewable energy assets and a valuable pipeline of future opportunities.

“The creation of SSE Renewables will build on SSE’s established skills in asset management and large capital project development and put the business in a strong position to evolve and succeed in a rapidly-changing electricity sector.”