SSE’s board is exploring “other options” for SSE Energy Services after the company’s proposed merger with Innogy’s Npower has been scrapped.

Options include a standalone demerger and listing on either the premium or the standard listing segment of the London Stock Exchange.

The company has revealed it is also considering a “sale” or an “alternative transaction”.

SSE said its board has determined it is “not in the best interests of stakeholders” to proceed with the proposed SSE Energy Services and Npower transaction.

Npower’s parent company Innogy SE and SSE were unable to reach an agreement on “revised commercial terms”, which the companies have been in discussion about since last month.

Work to separate SSE Energy Services from SSE plc will continue, while other options are considered, the company confirmed.

SSE Energy Services is “expected to be profitable” and “cash flow-positive” in 2018/19 and 2019/20.

The proposed creation of the new energy company was expected to see the “big six” transform to the big five. The move would have created the UK’s second largest UK energy supplier, behind British Gas.

The merger received final clearance from the Competition and Markets Authority (CMA). The decision followed provisional clearance which was given by the inquiry group of independent CMA panel members at the end of August.

The CMA said at the time that it decided to clear the merger after its two-phase investigation found that SSE and Npower are not close rivals for customers on standard variable tariffs.

In response to today’s (17 December) news a spokesperson from the CMA, said: “We conducted a thorough review into the merger. Ultimately it is a matter for the companies whether to proceed.”

Last month, it emerged that adjustments to the deal, regarding potential changes to the commercial terms of the proposed combination of SSE Energy Services and Npower, were being discussed by the two parties.

SSE’s board has today decided it is “not now in the best interests of customers, employees or shareholders to proceed with the transaction”.

The company said: “While the board believed strongly in the new company’s potential to deliver benefits for customers and the wider market, it does not now believe the new company would be in a position to meet trading collateral requirements in a sustainable way; and does not now believe the new company would be capable of listing on the premium segment of the official list and main market of the London Stock Exchange.

“The transaction has been impacted by multiple factors including the performance of the respective businesses, clarity on the final level of the default tariff cap, changing energy market conditions and the associated implications of these for both the joint business plan and the market in which the business would be operating. These implications meant the new company would have faced very challenging market conditions, particularly during the period when it would have incurred the bulk of the integration costs.”

SSE Energy Services “continues to deliver strong performance for customers, across a wide range of measures,” the company said.

The energy supplier came second out of 34 companies listed in the most recent Citizens Advice energy supplier performance rankings.

SSE said it believes that “SSE Energy Services will be best positioned to build on this strong performance in a future outside of the SSE group.

“With that in mind, SSE will continue to build on the significant work done to date to separate SSE Energy Services as an independent, self-sufficient entity within the group, in preparation for its future outside it,” the company’s statement concluded.

Alistair Phillips-Davies, chief executive of SSE plc, said: “SSE Energy Services remains a profitable business with a strong track record, a customer-centric culture and an excellent team that has enabled it to be a market-leader for many years.  We will build on this while continuing with separation activity in preparation for its long-term future outside the SSE group.”

What to read next