SSE and innogy have pulled the plug on the proposed merger of their respective supply divisions, with SSE concluding that it would not now be “in the best interests of customers, employees or shareholders”.
The company confirmed it is now looking at alternative options for the business, including a standalone demerger and listing as well as a sale to another third party.
In early November SSE and npower parent company innogy confirmed that the deal, first proposed in November last year, was to be renegotiated after the finer details of Ofgem’s cap on standard variable tariffs were announced.
But in a statement this morning, SSE said that attempts to reach new terms had been unsuccessful, and that the company was now exploring other options for the SSE Energy Services outfit which holds the UK supply business.
The statement also hinted further at the issues surrounding the proposed deal in the wake of the price cap. SSE said that the new entity would not be in a position to meet trading collateral requirements in a sustainable way and, in addition, would not be capable of listing on the premium segment of the London Stock Exchange’s Official List and Main Market.
SSE also pointed the finger at the performance of both respective businesses – despite SSE Energy Services expecting to be profitable and cash flow positive in both 2018/19 and 2019/20 – and “changing energy market conditions”.
In a separate statement, innogy said it had not yet provided an outlook for 2019 but, from today’s position, expected npower’s inclusion in group earnings for 2019 to have a negative impact of some €250 million (£224 million).
Alistair Phillips-Davies, chief executive at SSE, said: "This was a complex transaction with many moving parts. We closely monitored the impact of all developments and continually reviewed whether this remained the right deal to do for our customers, our employees and our shareholders. Ultimately, we have now concluded that it is not. This was not an easy decision to make, but we believe it is the right one.
"SSE Energy Services remains a profitable business with a strong track record, a customer-centric culture and an excellent team that has enabled it to be a market-leader for many years. We will build on this while continuing with separation activity in preparation for its long-term future outside the SSE group.
"We are now exploring all the available options with a view to delivering this future in the best possible way. In this, the interests of our customers, employees and shareholders remain paramount. In the meantime, we remain strongly committed to high standards of service for customers and delivery of our five-year dividend plan for shareholders.
Innogy retail COO Martin Herrmann said: “Adverse developments in the UK retail market and regulatory interventions such as the price cap have had a significant impact on the outlook for the planned retail company. We negotiated intensively with SSE on adjustments to the transaction as announced in November 2017. Unfortunately, we could not reach an agreement that was acceptable for both sides. We are now assessing the different options for our British retail business.”