Two of the UK’s biggest energy companies, SSE and npower, have announced plans to merge their residential supply business.
The firms are in advanced talks to create a new joint company, taking over the accounts of the 13 million gas and electricity customers they hold between them.
SSE shares rocketed from 1366p to 1422p when the news was announced, a rise of 4.0%, before falling back slightly.
The move is likely to raise concerns over competition in the UK residential market, reducing the number of big players – controlling 80% of supply – from six companies to five. Centrica, Iberdrola (SocttishPower), E.On and EDF make up the remainder of the Big Six.
Biggest UK supplier
Scottish-based SSE, listed in the UK, is Britain’s second biggest energy supplier, while the npower brand is owned by German company innogy. The merger would create an entity bigger than market leader British Gas.
SSE said in a brief statement: “In line with its stated commitment to embrace change in each of its businesses, adapting them to the political, economic, social and technological requirements of customers and of society as a whole, the board of SSE has been in discussions with innogy about creating a new independent energy supply company.
“In discussions, SSE is mindful of the requirements of customers and the concerns of employees. It will disclose the outcome of the discussions as soon as they are concluded.”
SSE said the combined business would be listed in its own right and SSE would demerge its shares to shareholders.
The announcement comes as Britain’s Big Six brace for a raft of regulatory changes after the government announced last month that a price cap will be imposed on poor-value energy tariffs.
SSE, formerly known as Scottish and Southern Energy, is Britain’s second biggest energy supplier serving 7.77 million households, while Npower caters to 4.8 million.
All have also come under recent pressure from smaller rivals who have been taking customers and market share.
Innogy facing ‘fierce competition’
Innogy booked a half-year loss for Npower in August as it grappled with what it called “fierce competition and political pressure”.
The German firm said it would attempt to counter “very tense” trading for the UK retail business by driving down costs, but admitted annual earnings would also be stuck in the red.
In July, SSE revealed it lost another 230,000 customer accounts as a result of households switching away from the Big Six to cheaper rivals as it blamed a “highly competitive” market.