SSE-nPower merger aims to shake up household energy market

SSE-nPower merger aims to shake up household energy market

SSE-nPower merger aims to shake up household energy market

Energy firms Npower and SSE (LON:SSE) have been in talks with potential plans to create a brand new energy giant. The merger is likely to raise competition concerns.

If cleared, a deal would see the big six potentially turned into a big five, by consolidating the operations of two of the companies that now dominate the sector.

The announcement, which would see the "Big Six" become the "Big Five", aims to create a new household supplier with 11.5 million customer accounts in the UK.

"The intervention of the Competition and Markets Authority and rising costs for customer acquisition as part of our new marketing strategy will have a significant negative impact on earnings in the United Kingdom", the group said on Wednesday.

According to SSE, the discussions between the two firms are "continuing and are well-advanced" but it added "no final decision and no binding agreements" have been reached. Prime Minister Theresa May promised in October to cap energy prices until at least 2020 in a bid to improve efficiency, competition, and value in the energy market.

SSE said shares of the combined group will be admitted to the premium listing segment of the official list on the London Stock Exchange and Hargreaves Lansdown said the new energy supplier faces a challenging market. This came as over the weekend the Telegraph reported SSE was considering an exit from the domestic energy market as the United Kingdom government cracks down on energy bills.

In comparison, Britain's largest supplier - British Gas - has a 33% share of the gas market and 22% share of electricity.

"While SSE could benefit from increased retail scale in the near term we believe that technological disruption is accelerating in the industry and that this willundermine the long term profitability of retailing in the United Kingdom", it added.

It flagged that any such combination proposal would be subject to the regulatory approvals, and approval of the transaction by SSE plc shareholders.

The news comes in the wake of the government's attempt to crack down on energy prices, despite warnings from the sector it could hurt profits.

"We don't see how turning the Big Six into the Big Five will help consumers".

Alex Neill, Which? managing director of home products and services, said: "Mergers of such big players in essential markets, such as energy, are rarely a good thing for consumers, especially given the low levels of competition".

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