SSE shares fall as energy firm admits merger with npower in trouble
Deal delayed as companies say talks over new terms will take several weeks
SSE shares fell 3 per cent after the company revealed the pair are renegotiating the terms of their tie-up.
Energy experts at Jefferies investment bank said the merger was left in a “shambles”, with worries for the future viability of the deal, which aims to create the UK’s second-biggest gas and electricity supplier.
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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.
But the firms said talks over the new terms of the deal will take “several weeks” and will probably see the deal delayed beyond the first quarter.
SSE chief executive Alistair Phillips-Davies insisted the group continues “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”.
It comes after the energy watchdog Ofgem confirmed on Tuesday that the energy price cap will come into force on 1 January, saving consumers up to £120 each.
The cap on poor value standard-variable tariffs 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.
Analysts at Jefferies said speculation suggested the deal was “in trouble”, but added it was unlikely just to have been caused by the incoming price cap.
They said: “While price caps are a major headwind for UK energy suppliers, this issue is well known in the market and the level at which the cap has been fixed was widely anticipated across the sector.
“In our view, ongoing market share loss, mounting losses at npower, the need to potentially inject capital in the new RetailCo, along with SSE’s own weakened financial position as a result of its recent profit warning, have all likely contributed to putting this merger at risk.”
Ofgem waived through the merger with npower in October, having conducted a full inquiry amid initial fears it could lead to higher prices.
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.
Under the proposed deal, the new company will be listed on the London Stock Exchange with SSE shareholders holding 65.6 per cent and npower owner Innogy holding 34.4 per cent.