A HAMPSHIRE energy provider has cast doubt over plans for a massive merger with a rival company.

Energy giant SSE had planned to merge with rivals Npower, but the pair last week delayed the tie-up due to the incoming cap on default tariff prices.

Now the company, which supplies powers for the south of England and large areas of Scotland, says there is "some uncertainty" over its planned deal.

But SSE said creating a new independent energy supplier remains its aim.

A spokesperson for SSE added: "The board believes that the best future for SSE Energy Services, including its customers and employees, will continue to lie outside the SSE group."

In half-year results released on Wednesday, SSE reported a 41% fall in underlying pre-tax profits to £246.4 million, stripping out its energy services division.

On a bottom-line basis, SSE posted pre-tax losses of £265.3 million for the six months to September 30 against profits of £409.3 million a year earlier.

Its energy services arm, which is split out from the main numbers due to the npower deal, saw losses widen to £62.1 million from £7.1 million a year ago.

SSE said the incoming price cap on standard variable tariffs (SVTs) - due to come into force in January - will put further pressure on profits in the retail division.

It said annual profit margins in the energy services arm is set to tumble to between 2% and 3%, down from 6.8% in the previous year, due to the price cap and "competitive pressures".

"Margins are expected to be lower still in 2019/20," it added.