Merger of SSE with Npower in Doubt
The incoming price cap on default tariffs has cast doubt on the intended merger between energy suppliers, SSE and Npower. The cap originally caused the merger to be delayed until early 2019, but now threatens it entirely.
Doubts emerged ever since Ofgem recently confirmed that the price cap will indeed be active from January 1st, 2019.
The cap will save consumers on default standard variable tariffs up to £120 each per year on their energy bills. The tariff has been capped at an initial £1,137 per year for average dual fuel customers paying by direct debit. However, this amount will be assessed and updated every April and October to allow for fluctuations in wholesale energy prices.
SSE and Npower Renegotiate Merger Terms
The doubts over the merger have already had a significant effect. Shares in SSE have dropped in price by 3% after the firm revealed the merger’s terms were being re-negotiated.
Statements released by both firms reveal that the talks to re-negotiate terms are expected to last several weeks. The earliest they will be concluded is by mid-December. The original merger plan had only recently being green lit by the industry regulator, the Competition and Markets Authority. Now any merger that does happen is unlikely within the first quarter of next year, as originally intended.
SSE’s statement also said, “There is now some uncertainty as to whether this transaction can be completed, as originally contemplated. Nevertheless, the board believes that the best future for SSE energy services, including its customers and employees, will continue to lie outside the SSE group.”
Customer Losses a Big Factor
Both firms involved in this merger have also been losing significant amounts of customers recently. SSE’s retail arm have lost close to half a million customers in the year up to September. Npower have fared even worse by losing 530,000 customers during the same time.
The merger had intended to turn the Big Six UK energy suppliers into a Big Five. This change would have meant the merged SSE and Npower would become the country’s second biggest supplier, behind British Gas.
Now the large numbers of customers switching suppliers during 2018 is adding to the worries of the two firms. According to reports of data compiled by Energy UK Statistics, 4.3 million customers switched supplier between January and October. There are also 70 different energy suppliers currently competing for a share of the UK market.
Merger Talks to Have Wide Reaching Implications
One major issue tied to the new merger talks will be the role of fellow Big Six supplier E.ON. The German firm had planned on holding a large amount of shares in the merged SSE and Npower. E.ON would remain one of the new Big Five while doing so, though their position is now also in doubt.
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