SSE and NPower merger delayed over price cap

Irving Hamilton
November 11, 2018

If the mega merger still goes ahead, it will amount to one of the biggest shake-ups of the United Kingdom energy market for years, reducing the big six to five and creating a firm with similar scale to British Gas for the first time.

Under the proposed deal, the new company will be listed on the London Stock Exchange with SSE shareholders holding 65.6 per cent and Npower owner Innogy holding 34.4 per cent.

It means suppliers will have to cut the price of their default tariffs to the level of the cap or below it. The cap will be in place by the end of the year.

SSE said that they expect the deal to run past the first quarter of 2019, adding that all work to seek to "achieve the formation and listing of the new company" will continue.

SSE issued a profit warning in September after the company was hit by lower output from its wind farms and high gas prices.

Alistair Phillips-Davies, chief executive of SSE, said: "We continue to believe that creating a new, independent energy supplier has the potential to deliver real benefits for customers and the market as a whole, and that remains our objective".

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.

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The companies appear to have given themselves a month to fix the crisis - SSE said it would provide an update on the merger in mid-December.

SSE hopes changing its terms with npower will help mitigate the impact of tighter regulation by the United Kingdom government to tackle rising energy prices. "Together with SSE we have chose 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".

Earlier this week, energy regulator, Ofgem said the cap would save 11 million customers an average of £76 a year on their gas and electricity bills.

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

It comes after the energy watchdog Ofgem confirmed on Tuesday that the energy price cap will come into force on 1 January, saving consumers up to £120 each.

The default rates are now paid by nearly half of United Kingdom households, despite a pick-up in switching rates.

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