SSE and npower merger ‘in a shambles’ after delays over price cap

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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.

But they said talks over the new terms of the deal will take "several weeks" and will likely see the deal delayed beyond the first quarter, although they stressed "all work" to complete the merger would continue.

Last month, the Competition and Market Authority (CMA) cleared the way for the merger between Scottish utility SSE and Germany's innogy, NPower's parent firm.

Such developments include the potential impact of the regulator's cap on the most commonly used tariffs on the new company's requirement to post collateral against its credit exposure, and its ability to obtain and retain an appropriate credit rating, SSE said.

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

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SSE issued a profit warning in September, saying earnings at its household supply business will be significantly lower if Ofgem's cap is implemented.

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

In an announcement released after the United Kingdom stock market closed on Thursday, SSE says it is considering "potential changes" to the commercial terms of its merger and re-listing on the Main Market.

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.

In separate statements issued yesterday evening (8 November), both SSE and innogy, the parent company of United Kingdom supply firm npower, revealed that the two had entered into discussions to renegotiate the terms of the merger agreement first disclosed in November past year. SSE will not provide further updates until then.

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. Consumers in Northern Ireland have a separate energy regulator and already have a price cap.

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