Thursday, 15 November, 2018

SSE and npower merger 'in a shambles' after delays over price cap

The energy company regulator Ofgem has warned in a report published today that enery companies in the UK are not offering customers true competitiveness Image SSE's household supply business is expected to join with Npower next year
Jean Garcia | 11 November, 2018, 00:50

SSE and npower, Innogy's British unit, won final regulatory approval for the tie-up last month, clearing the way for the creation of a new entity with around 23 percent market share, the second largest in the United Kingdom market behind Centrica's CNA.L British Gas, with 27 percent.

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.

Shares in SSE were down 3.6% at 1,139.5p in early deals.

Martin Herrmann, retail COO at innogy, meanwhile pointed to the complex nature of the transaction.

"Adverse developments in the United Kingdom retail market and regulatory interventions such as the price cap have had a significant impact on the outlook for the combined retail company".

Executives at SSE have been criticised after blaming the government's energy price cap for derailing the merger of its supply business with Npower, with City analysts describing the situation as a "shambles".

This week Ofgem set the final level of the price cap at £1,137 for a household with typical consumption, which the energy regulator expects to knock 5% off the profits of large suppliers.

Manchester United's Anthony Martial continues resurgence with France call-up
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Any changes to the combination terms would be created to mitigate the impact of these developments.

SSE announced after the market had closed on Thursday that SSE and Innogy SE, the owner of npower, are working together regarding potential changes to the commercial terms of the proposed combination of SSE Energy Services and npower Limited. "Together with SSE we have made a decision to enter into negotiations on adjustments of the terms of the agreement dated November 2017 including potential additional direct or indirect financial contributions by each party".

"Both Innogy and SSE continue to see the benefits of a combination of the two businesses". It is due to come into effect on 1 January.

SSE said that it had become apparent that the impact of "recent market developments", specifically the default tariff cap to be enforced by Ofgem, meant the commercial terms of the deal needed to be reconsidered.

The decision came after provisional clearance was given by the inquiry group of independent CMA panel members at the end of August.

Households in England, Scotland and Wales on default tariffs - such as standard variable tariffs - stand to benefit.

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