SSE’s merger with npower to be de­layed

The Courier & Advertiser (Perth and Perthshire Edition) - - BUSINESS -

Shares in en­ergy gi­ant SSE were hit yes­ter­day amid fears its merger with ri­val npower has been left “in a sham­bles” af­ter be­ing de­layed due to the in­com­ing cap on de­fault tar­iff prices.

Perth firm SSE re­vealed the pair are rene­go­ti­at­ing the terms of their tie-up as a re­sult of the cap, which is set to see the deal de­layed.

En­ergy ex­perts at Jef­feries 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.

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.

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.

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 Jan­uary 1, sav­ing con­sumers up to £120 each.

The cap on poor value stan­dard vari­able tar­iffs (SVTs) 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”.

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.”

Shares in SSE fell by 30p to close at 1,152.50p.

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