CMA refers SSE-Npower merger to in-depth probe

SSE's planned merger with Npower will be subject to an in-depth investigation due by 22 October, the competition regulator said on Tuesday.

SSE and Npower parent Innogy agreed terms over a proposed demerger of SSE's household energy and services business in the UK to combination with Innogy's subsidiary Npowe, to form a new independent UK-listed company to be held by SSE shareholders with minority participation by Innogy.

The Competition & Markets Authority’s carried out a 'phase 1' probe that determined such a merger "could reduce competition, potentially leading to higher prices for some bill payers", with the potential for a "substantial" worsening of competition within some areas of the market.

Although they were offered the chance to suggest measures to address these concerns, as neither SSE nor Npower came up with any proposals, the CMA has referred the merger for an in-depth 'Phase 2' review.

A decision on the merger will now be made by a group of independent panel members supported by a case team of CMA staff.

SSE and Innogy have claimed the merger would help create a new market model by combining the resources and experience of two established players with the focus and agility of an independent supplier. The shares of the combined residential-focused company would be listed on the London stock market on completion of the combination.

Completion of the transaction remained subject to necessary shareholder and regulatory approvals and other conditions, and was originally expected to be completed by the last quarter of 2018 or the first quarter of 2019.

“The scale of change in the energy market means we believe a separation of our household energy and services business and the proposed merger with npower will enable both entities to focus more acutely on pursuing their own dedicated strategies, and will ultimately better serve customers, employees and other stakeholders,” SSE chief executive Alistair Phillips-Davies last November.