SSE-Innogy Retail Tie-Up Gets British OK

Plans to set up a new British energy supply and services retail joint venture are “fully on track” said Germany’s Innogy and the UK’s SSE last week, after receiving an approval from the UK regulator.

The two utilities announced a plan to merge their retail businesses – currently branded respectively as npower and SSE - in November 2017 when they expected deal completion by end-2018 or 1Q2019, a target reaffirmed by both firms on August 30.

A lot has happened since, with Innogy’s majority owner RWE this March announcing its plan to break up Innogy, and sell its retail assets (including npower) to rival E.ON – which means that three of Britain’s six largest energy retailers could be wholly or partly E.ON-owned by the end of 2019.

UK competition regulator the Competition and Markets Authority (CMA) said August 30 it provisionally decided to clear the deal after finding that SSE and npower do not compete closely on 'standard variable tariffs' (SVT) - the most common and expensive household gas and electricity tariff. The deadline for the CMA’s final report is October 22 2018.

SSE’s CEO Alistair Phillips-Davies said August 30 that SSE was pleased the CMA had provisionally concluded that the proposed merger raises no competition concerns. Innogy too welcomed the CMA announcement, adding that completion of the SSE-npower tie-up remains expected for end of 2018 or beginning of 2019. It added that SSE’s shareholders approved the transaction in July and that the new retail merger’s designated CEO (Katie Bickerstaffe) and designated CFO (Gordon Boyd) are now in place. Both are appointments from outside Innogy and SSE. Innogy will hold a minority stake of 34.4% in the combined British retail company, while SSE will demerge its 65.6% stake to its shareholders upon completion of the transaction.

If the bigger RWE/E.ON deal in March goes ahead, E.ON will later replace Innogy in the joint venture. That jv plus E.ON’s existing UK retail arm would be larger than current market leader Centrica.

The CMA report acknowledged the potential impact of the RWE/E.ON deal but said simply: "We considered whether any account should be taken of the proposed E.ON/RWE transaction. Our provisional view is that we should not take into account the possible impact of this transaction in the counterfactual as both the likelihood that this transaction will complete and the outcomes of any antitrust and regulatory reviews are uncertain."  (The banner photo shows Innogy's HQ building in Germany, courtesy of Innogy)