SSE-Innogy tie-up an ‘unintended consequence’ of political intervention

Proposed merger a “shot across the bows of government” claims Green Energy chief executive

The proposed merger between SSE and Npower is an “unintended consequence of government intervention”, according to Green Energy chief executive Doug Stewart, who told Utility Week the move is a clear “shot across the bows of government”.

Ian Cain, former managing director of Centrica’s credit energy business agreed, suggesting the merger is an outcome of the way in which the competitive landscape is “shaping up” in the energy sector.

Speaking to Utility Week, he said: “I see some commentators attaching significance to price caps as a driver in this scenario, though the drivers for me are much wider.”

On 8 November, SSE and Innogy announced that they had agreed to merge Innogy’s British retail business Npower with SSE’s household energy and energy services business to form a new independent retail energy company.

The new company will not be controlled by either Innogy or SSE. Innogy will hold a minority stake of 34.4 per cent in the business, while SSE plans to demerge its 65.6 per cent stake to its shareholders upon completion of the transaction.

Innogy chief executive Peter Terium insisted the price cap was not the reason for the merger of its UK energy supply business Npower with SSE’s domestic retail arm, although he admitted it “might have pushed it a bit quicker”.

During a press conference call, Terium told journalists the timing is “irrespective of the price cap interference”.

He also emphasised that the merger is not an “exit before Brexit”, and added: “We have a very strong UK renewables business, and we intend to further expand this business, in particular to investments in new wind projects.”

However, market commentators have suggested the UK’s political environment is “making life difficult” for energy retailers.

Warwick Business School professor David Elmes said: “Despite an extensive review of energy markets by the Competition and Markets Authority, the government has chosen to go further than the CMA recommended in requiring changes to how companies supply energy,” he added. “We have just had another government review aiming to “recommend ways to keep energy prices as low as possible”.

He insisted that the Innogy-SSE announcement should act as a “wake-up call” to those piling pressure on the sector.

Labour has urged the government’s competition watchdog to ensure the planned merger between the retail energy arms of SSE and Innogy does not hurt customer choice.

Read Utility Week’s analysis on the SSE-Innogy merger here

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