Economy

Energy firms SSE and Npower renegotiate terms of merger

Energy firms SSE and Npower renegotiate terms of merger

The cap on poor value standard variable tariffs (SVTs) has initially been set at £1,137 per year for a typical dual fuel customer paying by direct debit, but will be updated every April and October.

SSE, whose deal with Germany's Innogy - owner of NPower - would have created the second-biggest energy supplier behind Centrica-owned British Gas, said the "proposed combination would be delayed beyond Q1 of 2019".

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.

The government introduced legislation earlier this year to establish the price cap following concerns about how efficiently the energy market was working.

The two firms had been hoping to seal the merger of their retail operations in the first quarter of 2019 after it was recently given the green light by the competition watchdog.

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.

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Adjustments are being made to the merger between Npower and SSE's retail arm due to "adverse developments in the United Kingdom market", Npower's parent company Innogy SE has announced.

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

SSE revealed late on Thursday that the pair are renegotiating the terms of their tie-up as a result of the cap, although stressed they were still committed to the deal.

Innogy-owned npower and SSE announced in November that their British household energy supply and services businesses would join forces, reducing the Big Six energy suppliers to five.

Any changes to the combination terms would be created to mitigate the impact of these developments.

But Alistair Phillips-Davies, chief executive at SSE, said SSE was standing firm in its belief that a potential merger could deliver "real benefits" for customers and the market in general. "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".


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