SSE and NPower merger to be delayed into 2019

The energy company regulator Ofgem has warned in a report published today that enery companies in the UK are not offering customers true competitiveness

SSE and npower, Innogy's British unit, won final regulatory approval for the tie-up last month, clearing the way for the creation of a new entity with around 23 percent market share, the second largest in the United Kingdom market behind Centrica's CNA.L British Gas, with 27 percent.

News of the delay to the tie-up, announced after markets closed on Thursday, caused SSE's share price to open 3.2 per cent down, at £11.45, on Friday morning.

SSE chief executive Alistair Phillips-Davies 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".

Talks between npower and SSE have been ongoing since October, when the two firms waived through the merger after conducting a full inquiry amid initial fears it could lead to higher prices.

Martin Herrmann, retail COO at innogy, meanwhile pointed to the complex nature of the transaction.

Innogy SE said the price cap would have a significant impact and cited adverse market conditions, but said both companies still saw the benefits of a merger.

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The firms have made a decision to enter into negotiations to change the terms of the planned transaction, as a result of adverse market developments and regulatory interventions they think are likely to impact the creation of the combined retail company.

A planned asset swap between Innogy's German parent RWE and peer E.ON EONGn.DE would see Innogy's assets, likely including npower, divided between the two companies.

This week Ofgem set the final level of the price cap at £1,137 for a household with typical consumption, which the energy regulator expects to knock 5% off the profits of large suppliers. It is due to come into effect on 1 January.

The energy firm said it had become apparent that the impact of some "recent market developments", including the price cap, meant that the "commercial terms associated with the proposed combination will need to be reconsidered".

Following a thorough review, the panel investigated how the merger would affect householders. The group specifically examined competition concerns around how the deal would impact standard variable tariff (SVT) prices.

The new company, which is yet to be named, already has several board members in place.

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