SSE and npower agree energy supply merger

The tie-up coincides with Government efforts to cap default energy tariffs

By James Sillars, Business Reporter

A merger has been agreed that could see two of the so-called 'big six' household energy suppliers join forces – if regulators agree.

SSE said the scale of change in the market, that has included Government plans to cap the most expensive tariffs, meant that it had agreed a tie-up with npower's parent company – Germany's Innogy.

It will see the two firms merge their household energy supply and services businesses in the UK, creating a new firm that would be listed in London.

SSE would hold 65.6% of the stock under the plans.

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What's behind Big Six firms' merger plans?

The pair, which had revealed advanced discussions on a deal the previous day, hoped shareholder approval could be completed by next summer.

A tie-up would consolidate SSE as the country's second-largest supplier of household energy behind Centrica-owned British Gas with a combined customer base of more than 11 million customers.

SSE said it would help them compete in a "competitive and regulatory environment" as well as realise efficiency savings.

The industry is under pressure to scrap controversial standard variable tariffs, described as a "rip-off" by the Prime Minister as the Government moves to cap the charges – often the most expensive in the market.

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Price cap on household energy bills unlikely this year

The default rates are currently paid by almost half UK households, despite a pick-up in switching rates.

News that a merger between SSE and npower had been agreed was made as the larger firm announced a 40% drop in pre-tax profits to £402m – blaming higher investment costs.

SSE boss, Alistair Phillips-Davies, said: "The scale of change in the energy market means we believe a separation of our household energy and services business and the proposed merger with npower will enable both entities to focus
more acutely on pursuing their own dedicated strategies, and will ultimately better serve customers, employees and other stakeholders."

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