SSE, Npower merger provisionally cleared by CMA

The Competition and Markets Authority (CMA) said on Thursday it has provisionally cleared the merger of SSE Retail and Npower after an in-depth review.

Perth-based energy giant SSE said last November it agreed to demerge its household energy and services business in Great Britain with Innogy subsidiary Npower to form a new listed UK company.

The merger would create Britain’s second-largest retail power provider, with a roughly 23% market share –behind Centrica’s British Gas with 27%.

It would also reduce the “Big Six” power providers to five.

SSE and Npower combined would have roughly 11.5 million customers, behind British Gas which has more than 14 million customer accounts.

Innogy will hold 34.4% of the combined retail company while SSE will demerge its stake of 65.6% to its shareholders.

“The CMA has provisionally found that the proposed merger between SSE Retail (SSE) and Npower does not raise competition concerns,” said the CMA.

“An inquiry group of independent Competition and Markets Authority (CMA) panel members has investigated how the merger would affect householders, following initial concerns about the potential impact on ‘standard variable tariffs’ (SVTs) – the most common and expensive energy tariff.

“As part of its in-depth review, the inquiry group has provisionally decided to clear the deal after finding that SSE and Npower do not compete closely on SVT prices.”

Anne Lambert, Chair of the Inquiry Group, said: “It is vital that householders have a range of energy suppliers to choose from so they can find the best deal for them.

“With more than 70 energy companies out there, we have found that there is plenty of choice when people shop around.

“But many people don’t shop around for their energy. So, we carefully scrutinised this deal, in particular how it would impact people who pay the more expensive standard variable prices.

“Our analysis shows that the merger will not impact how SSE and Npower set their SVT prices because they are not close rivals for these customers.

“Looking ahead, Ofgem’s price cap is also expected to protect SVT customers.”

The CMA added: “The CMA now welcomes views and evidence on its provisional decision by 20 September 2018 before coming to a final view.

“The statutory deadline for the CMA’s final report is 22 October 2018.”

SSE CEO Alistair Phillips-Davies said: “The planned transaction presents a great opportunity to create a more agile, innovative and efficient company that really delivers for customers and the energy market as a whole.”

“We look forward to continuing to engage with the CMA as it prepares its Final Report ahead of the statutory deadline in October.

“We remain confident that the formation and listing of the new company is on track for completion by the end of SSE’s financial year.”

Martin Herrmann, COO Retail of innogy SE, said: “Our plans for a new British retail energy company are clearly on schedule and today’s announcement, that the UK Competition and Markets Authority has given provisional clearance to the planned merger, is another important milestone.

“We believe that the new organisation will combine the best from both companies to meet evolving customer expectations and address advancing market challenges.”