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SSE, Innogy in talks to change terms of British retail energy tie-up

SSE, Innogy in talks to change terms of British retail energy tie-up
An SSE company logo is seen on signage outside the Pitlochry Dam hydro electric power station in Pitlochry, Scotland, Britain, November 8, 2017. REUTERS/Russell Cheyne   -   Copyright  RUSSELL CHEYNE(Reuters)
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BENGALURU/FRANKFURT (Reuters) – Energy supplier SSE Plc <SSE.L> and Innogy SE <IGY.DE> are discussing changes to the terms of a planned tie-up of their British retail units, after Britain’s regulator proposed a price cap on default energy bills.

SSE, whose deal with Innogy would create the UK’s second-largest retail power provider, said it was likely that the completion of the deal would be delayed beyond the first quarter of 2019.

SSE said the talks were expected to take place over several weeks, with an update on progress to be given by mid-December. Innogy said adjustments could include additional direct or indirect financial contributions by each party.

“The impact of some recent market developments means that the commercial terms associated with the proposed combination will need to be reconsidered,” SSE said in a statement.

Such developments include the potential impact of the level of the default tariff cap on “the new company’s requirements to post collateral against its credit exposure and its ability to obtain and retain an appropriate credit rating,” SSE said.

Britain’s regulator proposed a price cap on default energy bills to save households about a 1 billion pounds ($1.31 billion).

The regulator, Ofgem, said it wanted to cap the default electricity and gas bill at 1,136 pounds a year, a level below the most-used tariffs set by the country’s big six suppliers but not as severe as some had expected

SSE also said it was talking to Innogy about the listing of the new company on the London Stock Exchange. Innogy said both groups were still working on enabling a listing of the combined entity.

SSE and Npower, Innogy’s British unit, last month won final regulatory approval for the tie-up, clearing the way for the creation of a new entity with a 23 percent market share, the second largest in the UK market behind Centrica’s <CNA.L> British Gas, with 27 percent.

(Reporting by Noor Zainab Hussain in Bengaluru and Christoph Steitz in Frankfurt; Editing by Alexandra Hudson)

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