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Npower and SSE scrap merger plans

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Written by: Danielle Levy
17/12/2018
The planned merger between energy suppliers SSE and Npower has been scrapped after both companies failed to reach an agreement on financial contributions to support the combined entity.

The deal would have reduced the UK’s so-called ‘Big Six’ energy providers to five and follows clearance from the regulator.

The merged Npower-SSE would have become the second biggest energy company in the UK, with a 23% share of the electricity market and a 19% share of the gas market, according to auto-switching service Look After My Bills.

The two businesses failed to come up with an agreement after renegotiating the deal because of the government’s new price cap, which is due to come in next year.

In a statement SSE said it no longer believed the merger was in the best interests of its customers, employees and shareholders. It now takes the view that it would be better to spin off its retail business in a demerger, listing or sale.

“This was a complex transaction with many moving parts. We closely monitored the impact of all developments and continually reviewed whether this remained the right deal to do for our customers, our employees and our shareholders,” explained Alistair Phillips-Davies, chief executive of SSE.

“Ultimately, we have now concluded that it is not. This was not an easy decision to make, but we believe it is the right one,” he added.

Martin Herrmann, chief operating officer of Innogy, the parent company of Npower, pointed to “adverse developments in the UK retail market”. He said the price cap had impacted the outlook for the merged business.

“We negotiated intensively with SSE on adjustments to the transaction as announced in November 2017. Unfortunately, we could not reach an agreement that was acceptable for both sides,” he added.

Bill savings can still be made

Stephen Murray, energy expert at MoneySuperMarket, described the news as “disappointing”, as it could have delivered efficiencies and customer benefits across both companies.

“There has been a danger that too many suppliers being allowed unchecked access to the market over recent years, combined with the imposition of the price cap at a time when market competition and customer benefits were thriving, would create a negative impact on the residential energy market,” he explained.

He points to eight supplier failures this year, with many taking place since the price cap was announced.

“Throughout all of this, consumers will be caught in the confusion of what is actually the right thing to do. Thankfully, that’s still clear – switch your energy today. Great savings can still be made and once you have switched to a fixed deal you can let all this news pass you by,” he added.

Lily Green, head of research at Look After My Bills, welcomed news that the merger had been scrapped.

“This is a sigh of relief for consumers. The Big Six becoming the Big Five was a frightening prospect and a step in completely the wrong direction.

“The way to increase competition in the energy market is to lessen the Big Six’s stranglehold on the market rather than having two of the biggest merge,” she explained.

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