SSE and npower merger hits the skids over price cap

A gas ring

A gas ring

If the mega merger still goes ahead, it will amount to one of the biggest shake-ups of the United Kingdom energy market for years, reducing the big six to five and creating a firm with similar scale to British Gas for the first time.

SSE said it is likely that completion of the deal will be delayed beyond the first quarter of 2019, but all work to "seek to achieve the formation and listing of the new company will continue".

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".

Late on Thursday the companies admitted the merger was unlikely to complete at the start of 2019 as planned, due to the new considerations.

Next year will see the introduction of the energy bill price cap, which has been set at £1,137 a year for "typical usage".

It said the talks were expected to take place over several weeks, with an update on progress to be given by mid-December.

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The government introduced legislation earlier this year to establish the price cap following concerns about how efficiently the energy market was working.

The UK's competition watchdog cleared the creation of a new energy giant in August, but it now appears the business rationale for the merger may be its biggest threat. After recovering slightly, it fell again to a low of £11.28 - a drop of 4.6 per cent - before rallying to close at £11.52, down 2.5 per cent on the day.

The firms have chose 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.

SSE chief executive Alistair Phillips-Davies yesterday 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". "Together with SSE we have made a decision to enter into negotiations on adjustments of the terms of the agreement dated November 2017 including potential additional direct or indirect financial contributions by each party".

In an announcement released after the United Kingdom stock market closed on Thursday, SSE says it is considering "potential changes" to the commercial terms of its merger and re-listing on the Main Market.

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