Germany’s Innogy carve-up could scupper Scots power giants’ merger plan

Alistair Phillips-Davies, Chief Executive, Scottish and Southern Energy (SSE)
Alistair Phillips-Davies, Chief Executive, Scottish and Southern Energy (SSE): ‘No comment’.

A surprise carve up of Germany’s Innogy – designed to prevent foreign take-overs of German power companies – could complicate the planned merger of Innogy-owned Npower  with Perth-based SSE to create Britain’s second largest energy supplier.

Under the proposed break-up of Innogy, its assets will be divided between parent RWE and E.ON, which would take over Npower – potentially raising regulatory concerns.

SSE and Npower announced plans last year to merge their retail gas and electricity supply operations, combining some 11.5 million customers to better challenge top-ranked British Gas.

Uncertainty over the merger plan hit SSE shares yesterday – they were down 1.2 percent to 1242 pence per share at midday,

Britain’s Competition and Markets Authority (CMA), which is expected to make an initial decision by April 26 on the planned merger, said it will be ‘engaging with both SSE and Innogy to consider the implications’ of the new German deal.

An analyst told Reuters: “The deal the CMA has been looking at is between Innogy’s npower and SSE, but now if Npower is owned by E.ON, that’s three of the Big Six  suppliers involved.”

Neither Innogy, RWE nor SSE commented on how the E.ON/Innogy transaction could impact the British merger,  which would create a new separately-listed retail company, with SSE shareholders holding 65.6 percent and Innogy 34.4 percent respectively.

Meanwhile, Npower lost 155,000 household customers last year amid the highest customer churn in the UK for several years.

The ‘British’ Big Six provider had 4.56 million UK customer accounts at the end of 2017, down from 4.71 million a year earlier.

Npower’s revenues for 2017 dropped by £76 million £6.027 billion due also to fierce competition between suppliers.

Chief Executive Paul Coffey said: “Energy supply remains an extremely competitive market. Rising costs and the changing regulatory landscape, such as the proposed standard variable tariff price cap, present all energy suppliers with real challenges.”

He also said the proposed merger with SSE is ‘on track’ and the company had recently started work to start a review process for the Competition and Markets Authority.

Some MPs and the GMB energy workers’ union have already called for the proposed SSE-Npower merger to be halted by the competition regulator.

13 Mar 2018

Pixie Energy

Pixie logo Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy here.

Local Energy Matters: Scotland

Local Energy Matters: Scotland is a free-to-download brochure with a focus on energy tariffs in the two Scottish electricity distribution regions, as well news on local energy and low-carbon schemes.

Previous editions can be download here.

Scottish energy market overview

You can read an overview of the Scottish energy market here.

Scottish Government energy feed