SSE shares take a hit because the viability of the merger of the energy supplier & # 39; Big Six & # 39; with Npower being questioned
SSE shares take a hit because the viability of the merger of the energy supplier & # 39; Big Six & # 39; with Npower being questioned by price-cap plans
- British energy giants have announced that they will renegotiate the terms of the deal
- It comes after Ofgem said that a price ceiling for energy bills will come into force in 2019
- Energy experts say the deal can be left in a shambles & # 39;
This Is Money Reporter
The merger between energy giants Npower and SSE may lag behind after the two companies have announced that they are renegotiating the terms of their planned union.
The two "Big Six" companies, which have joined forces to create the United Kingdom's second largest energy company, say the agreement is being delayed due to the incoming ceiling at standard rate prices.
An energy bill of £ 1,137 per year for & # 39; typical use & # 39; should enter into force in 2019, which means that suppliers have to lower the price of their standard rates to £ 1,137 or less.
SSE, a FTSE 100 company, plans to merge with fellow energy company npower, with its shareholders holding a 65.6% stake
The shares in SSE fell 3 percent after the news.
Energy experts at Jefferies Financial Group said the merger in a & # 39; shambles & # 39; lagged behind, ensuring the future viability of the deal, which was recently highlighted by the competition regulator.
The expectation was that the merger would be completed in March 31, 2019, but now the two companies say that the discussions & # 39; several weeks & # 39; will continue, although emphasis will be placed on it.
SSE CEO Alistair Phillips-Davies insisted that the group continue to believe that creating a new, independent energy supplier has the potential to deliver real benefits to customers and the market as a whole, and that remains our goal.
Energy watchdog Ofgem confirmed Tuesday that the energy price limit will come into effect on January 1, saving consumers up to £ 120 each.
Analysts at Jefferies said that speculation suggested that the deal is in trouble & # 39; but added that it was unlikely that they were only caused by the incoming price cap.
They said: "Although the price caps are a major headwind for British energy suppliers, this issue is well known in the market and the level at which the upper limit is set was widely expected across the industry.
In our opinion, continued loss of market share, increasing losses at Npower, the need to inject potential capital into the new RetailCo along with the weakened financial position of SSE due to the recent profit warning, likely contributed to this merger at risk. & # 39;
Conversations between npower and SSE have been going on since October, when the two companies withdrew from the merger after carrying out a full investigation amidst initial fear that this could lead to higher prices.
According to the proposed agreement, the new company will be listed on the London Stock Exchange, with the shareholders of SSE 65.6% and the owner Innogy of Npower 34.4%.