SSE, Innogy delay UK retail tie-up as price cap looms

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Energy experts at Jefferies said the merger was left in a "shambles", with worries for the future viability of the deal, which aims to create the UK's second-biggest gas and electricity supplier.

Energy firms SSE and Npower are renegotiating the terms of a merger of their United Kingdom retail operations, blaming the introduction of an energy price cap.

SSE cited recent market developments, which it said included: "The potential impact of the level of the default tariff cap on, amongst other things, the new company's requirements to post collateral against its credit exposure and its ability to obtain and retain an appropriate credit rating".

On Tuesday (6 November) Ofgem announced the price cap will be set at £1,137, which is just £1 higher than the proposed amount.

The regulator said it will cap average default electricity and gas bills at 1,137 pounds a year from January 1, a level well below the most-used tariffs set by the country's big six suppliers.

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.

SSE confirmed they expect these discussions to take place "over several weeks".


The UK's competition watchdog cleared the creation of a new energy giant in August, but it now appears the business rationale for the merger may be its biggest threat.

In September, SSE said the cap would lead to "significantly lower" profits than it had expected at the start of the financial year in its retail arm.

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".

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

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.

"In assessing potential changes to the commercial terms of the proposed SSE Energy Services/npower combination, the interests of customers, employees and shareholders will be paramount", he added.

"Both Innogy and SSE continue to see the benefits of a combination of the two businesses".

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