SSE confirms Innogy tie-up plan as profits see sharp fall

● Merged supplier would have £11bn annual turnover ● New firm would seek London stock exchange listing

SSE and Npower’s German owner Innogy yesterday fleshed out their plans to create a newukenergysupplierwhich would have annual sales of £11 billion.

Confirmation that they were pressing ahead with the move first announced on Tuesday came as the Perth-headquartered utility reported a sharp fall in half-year profits. Profit before tax was down 40.4 per cent to £402.2 million, with the firm blaming increased capital expenditure and a fall in customer numbers.

SSE’S chairman Richard Gillingwater said the company operates in an environment which “continues to present a number of complex challenges to manage, with significant political and regulatory intervention an ongoing feature of the energy sector”.

Under the tie-up between SSE and Innogy, the two will merge their household energy supply and services business in Britain, turning the “big six” energy suppliers into five.

The new company will be listed on the London Stock Exchange with SSE shareholders holding 65.6 per cent and Innogy 34.4 per cent. Shareholders in SSE will vote on the deal by July next year, while Innogy has committed to seek the approval of its supervisory board by the end of 2017.

Alistair Phillips-davies, SSE’S chief executive, 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.”

The announcement comes as Britain’s big six brace themselves for a raft of regulatory changes after the UK government announced last month that a price cap will be imposed on poor-value energy tariffs. SSE said that the merger will help the firms compete in a “competitive and regulatory environment” as well as realise efficiency savings.

SSE is Britain’s second biggest energy supplier and the merged group will serve around 11.5 million customers. Centrica, Scottishpower, E.ON and EDF make up the remainder of the big six. All have also come under recent pressure from smaller rivals who have been taking customers and market share.

Innogy booked a half-year loss for Npower in August due to what it called “fierce competition and political pressure”. It said it would attempt to counter tough trading by cutting costs. Hindles, a firm of patent and trade mark attorneys based in Edinburgh, has moved to larger premises on the city’s George Street, completed a rebranding and begun hiring following a record year of growth. Founding director Alistair Hindle, pictured, right, with fellow director Robert Gregory, said: “For many Scottish technology companies, the UK is only a stepping stone and increasingly we have to advise our clients with a global perspective.”