Published: Sun, November 11, 2018
Economy | By

SSE and NPower merger to be delayed into 2019

SSE and NPower merger to be delayed into 2019

Martin Herrmann, Chief Operating Officer Retail of innogy, said: "The planned merger of our subsidiary npower with SSE's British retail energy business is a complex transaction".

It disappointed shareholders by cutting its profit outlook twice this year and analysts at Bernstein warned that the latest news was "another blow to SSE management's..."

SSE said the two firms were discussing changes to the terms of the planned tie-up of their British retail units, and that the deal was unlikely to be completed until after the first quarter of 2019.

"The impact of some recent market developments means that the commercial terms associated with the proposed combination will need to be reconsidered", SSE said in a statement.

It said the talks were expected to take place over several weeks, with an update on progress to be given by mid-December.

It elaborated that the price cap stood to have an effect on the new entity's requirements to post collateral against its credit exposure and its ability to obtain and retain an appropriate credit rating.

An energy bill price cap of £1,137 a year for "typical usage" is due to come into force in 2019, meaning suppliers will have to cut the price of their default tariffs to £1,137 or less.

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.

Shares in SSE were down 3 percent while shares in Innogy slipped 0.5 percent by 1040 GMT.

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.

However, SSE said it was now not likely to be done by then.

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.

It said the negotiations would include talks about "potential additional direct or indirect financial contributions by each party".

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

Like this: