Speculation has been mounting about the future of SSE’s retail arm since the proposed merger with Npower collapsed last year – and now the company is reported to have approached Talk Talk about a deal.
According to Sky News, SSE has been trying to find a buyer or merger partner and has been in discussions with telecommunications company Talk Talk and other “utility providers” in recent weeks.
“City insiders said this weekend it had stepped up efforts to find a suitor for the division , which supplies close to six million households across Britain,” Sky reported.
News outlets have acknowledged that a tie-up between SSE and Talk Talk is “highly unlikely” to proceed, while both companies have declined to comment on the speculation.
SSE told Utility Week it would not be appropriate to comment on market speculation and its statement from the “notification of close period still stands”.
The company is expected to provide an update on 22 May when it publishes its full year results.
SSE Energy Services recently paid £700,000 to Ofgem’s consumer redress fund to make amends for having missed its gas smart meter installation target last year.
Earlier this month, Utility Week reported that SSE Group is being advised by Katie Bickerstaffe on the future options of its retail arm after the proposed merger with Npower was called off.
Bickerstaffe was announced as chief executive designate for the new retailer, which would have created the UK’s second largest energy supplier, behind British Gas, had the deal with Innogy’s Npower gone ahead.
Options on the table previously announced by SSE include a “sale”, “demerger” or an “alternative transaction”.
A spokesperson for SSE said: “All options are being assessed with the interests of customers, employees and shareholders being given full consideration. SSE intends to provide an assessment of the preferred option by the end of May 2019.”
According to SSE’s latest financial statement its retail arm is expected to be profitable and cash flow positive (excluding working capital movements) in 2018/19 and 2019/20.
For the full year 2018/19 its household energy supply business is anticipated to report an adjusted operating margin of 2-3 per cent, compared to 6.8 per cent in the previous year, reflecting the introduction of the tariff cap and lower customer numbers.
SSE said that should the proposed options “not be viable” the company would expect to retain Energy Services as a separate entity within the SSE Group.
The planned merger between SSE and Innogy’s retail arm Npower collapsed in December last year after the two companies were unable to reach an agreement on the terms of the deal.
“Adverse developments” in the retail market and “regulatory interventions” such as the price cap were cited as reasons behind the decision.
Innogy is assessing options for its British retail business.