SSE, Innogy delay UK retail tie-up as price cap looms

10th November 2018 | Residential Energy

A deal to create the UK’s second biggest retail power provider has been delayed to beyond the first quarter of next year, with SSE and Innogy renegotiating merger terms after Britain’s regulator proposed a cap on energy bills. The merger, a major shake-up of the UK power market that would cut the dominant big six firms to five, comes after the government ramped up scrutiny of Britain’s big energy suppliers, which it has accused of ripping off customers.

SSE said the two firms were discussing changes to the terms of the planned tie-up of their British retail units, and that the deal was unlikely to be completed until after the first quarter of 2019. It did not five a new timeframe for when talks might be concluded. It said the talks were expected to take place over several weeks, with an update on progress to be given by mid-December, Innogy said adjustments could include additional financial contributions by each party.

Price cap

“The impact of some recent market developments means that the commercial terms associated with the proposed combination will need to be reconsidered,” SSE said in a statement. Such developments include the potential impact of the regulator’s cap on the most commonly used tariffs on the new company’s requirement to post collateral against its credit exposure, and its ability to obtain and retain an appropriate credit rating, SSE said.

Regulator Ofgem proposed the price cap on default energy bills – those to which customers default once fixed price periods end – to save households about 1 billion pounds ($1.31 billion) a year. The regulator said it will cap average default electricity and gas bills at 1,137 pounds a year from January 1, a level well below the most-used tariffs set by the country’s big six suppliers.

SSE and Npower, Innogy’s British unit, won final regulatory approval for the tie-up last month, clearing the way for the creation of a new entity with around 23 percent market share, the second largest in the UK market behind Centrica’s British Gas, with 27 percent.

More information available on the website below