business

Fusion of SSE and npower is in the balance

The merger of two of the largest energy companies in the UK lingers after npower and SSE said they should reconsider the terms of the deal because of the government price ceiling and the difficult market conditions.

Late Thursday, the companies admitted that the merger was unlikely to be completed by the beginning of 2019, as planned, due to the new considerations.

Innogy SE, the German owner of npower, said the parent companies might have to inject more money into the planned new merged energy giant, which would be almost as big as British gas market leader if it continues.

UK-listed SSE accused the impact of the government's price ceiling on standard tariffs and the challenge to get an "appropriate credit rating" for the new energy supplier.

The British watchdog in the UK has approved the creation of a new energy giant in August, but now the business reason for the merger seems to be the biggest threat.

The Guardian understands that the deal is in serious trouble, but can still be saved if new conditions can be agreed.

SSE mentioned recent market developments, including: "The potential impact of the standard rate limit on … the new firm's requirements to place collateral against its credit exposure and its ability to obtain and maintain an appropriate credit rating . "

This week Ofgem set the final level of the price limit to £ 1,137 for a household with a typical consumption, of which the energy regulator expects 5% of the profits of large suppliers.

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Innogy SE said that the price cap would have a significant impact and mentioned the adverse market conditions, but said that both companies still saw the merits of a merger.

Martin Herrmann, Innogy SE, said the new negotiations would include "potential additional direct or indirect financial contributions from each party".

If the mega-merger continues, this will be one of the biggest shakes in the British energy market for years, reducing the big six to five and creating a company with a comparable scale to British Gas for the first time.

The companies seem to have given themselves a month to solve the crisis – SSE said it would give an update on the merger in mid-December.

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