Adjustments are being made to the merger between Npower and SSE’s retail arm due to “adverse developments in the UK market”, Npower’s parent company Innogy SE has announced.
News of the delay to the tie-up, announced after markets closed on Thursday, caused SSE’s share price to open 3.2 per cent down, at £11.45, on Friday morning. 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 development was denounced as a ‘shambles’ by some industry analysts who forecast it could throw the whole deal into doubt. However Alistair Phillips-Davies, chief executive of SSE, maintained it continued 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 this remained the objective.
Both companies have decided to enter into negotiations on adjusting the terms of the planned transaction to combine Innogy’s British retail business with SSE’s household energy and energy services business in Great Britain as agreed in November last year.
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”.
In a statement Martin Herrmann, chief operating officer retail of Innogy, blamed regulatory interventions such as the price cap as having had a “significant impact” on the outlook for the combined company.
On Thursday (8 November) Herrmann said: “The planned merger of our subsidiary Npower with SSE’s British retail energy business is a complex transaction. Adverse developments in the UK retail market and regulatory interventions such as the price cap have had a significant impact on the outlook for the combined retail company.
“Both Innogy and SSE continue to see the benefits of a combination of the two businesses. Together with SSE we have decided 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.”
Alistair Phillips-Davies, chief executive of SSE, added: “In assessing potential changes to the commercial terms of the proposed SSE Energy Services/Npower combination, the interests of customers, employees and shareholders will be paramount.
“In the meantime, our skilled and committed SSE Energy Services team continues to be focused on providing a high standard of service to our customers.”
As of yet no details of what is being renegotiated have emerged.
On Tuesday (6 November) Ofgem announced the price cap will be set at £1,137, which is just £1 higher than the proposed amount. It is due to come into effect on 1 January.
Last month the Competition and Markets Authority’s (CMA) gave the green light to the proposed merger between the two companies.
The decision came after provisional clearance was given by the inquiry group of independent CMA panel members at the end of August.
Following a thorough review, the panel investigated how the merger would affect householders. The group specifically examined competition concerns around how the deal would impact standard variable tariff (SVT) prices.
The new company, which is yet to be named, already has several board members in place.
Martin Read was appointed as chairman designate in October while Katie Bickerstaffe was earlier named as chief executive.
Gordon Boyd meanwhile was appointed as chief financial officer in June.