SSE/Innogy retail merger likely to face competition test

Consumer organisation Which? expressed concern after SSE and Innogy announced plans to spin off and merge their supply businesses.

A new supply company will be created to include SSE’s domestic energy supply and services business in GB and Innogy’s Npower household and business energy supply business in GB. SSE, which will be the majority partner with 65.6% of the combined company, said the new company would combine experience with the “focus and agility of an independent supplier”.

SSE said its remaining business would be a “balanced group of related businesses specialising in the energy, infrastructure and services needed to support the transition to a lower carbon future”. It will retain business customers (it has around 10% of the market) and both business and domestic Irish customers, which are served under its Airtricity brand. 

Innogy said it would retain its stake in the new company for at least six months. The merger will be put to Innogy shareholders in December and SSE shareholders in July 2018. The new company should go into operation in 4Q 2018 or 1Q 2019.

SSE shares rose following the announcement, but consumer organisation Which? warned, ”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. As both businesses struggle on customer service, coming in the bottom half of our satisfaction survey, the competition authorities must take a hard look before allowing any venture to go ahead.” Npower was in 23rd place and SSE joint 15th with British Gas, GB’s largest supplier, in Which?’s recent customer satisfaction survey.

In the domestic electricity market SSE currently has a 14% market share and Npower 9%, while in gas SSE has 11% and Npower 8%. The merger will likely prompt an investigation by competition authorities.

 

 

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