German energy group Innogy unit npower and UK-based SSE have agreed to merge their retail energy activities in the UK and form a new independent energy supply and services business.

The new independent UK incorporated company, which will be 65.6% owned by SSE and 34.4% by Innogy, is expected to be the country’s second largest household energy supplier after Centrica’s British Gas unit.

The new entity will include SSE’s household energy supply and services business in Great Britain as well as household and business energy supply and services business of npower, an Innogy’s subsidiary.  

SSE CEO Alistair Phillips-Davies said: "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.”

The combined retail company will offer services including electricity and gas supply to domestic and business customers, and also a wide range of energy solutions including energy-related home services as well as business solutions.

Innogy CEO Peter Terium said: “Following the successful IPO of innogy and the recent adjustment of our corporate strategy, we are now redefining our involvement with the UK retail energy market at the right time.

“However, when we look at the competitive landscape and the uncertain political environment for energy retailers in Great Britain, it is clear that npower would be better placed to offer value to our customers and our shareholders as part of a new company with the ability to succeed in the face of the challenges that lie ahead.”

The new entity, which will comprise retail customer business of npower and SSE, will be listed on the London stock exchange.

However, SSE’s business retail and Ireland operations will be excluded from the combined company.

Planned to be completed by the last quarter of 2018 or the first quarter of 2019, the deal is subject to necessary shareholder and regulatory approvals, among others.

Image: The new combined company will be the second largest household energy supplier in the UK. Photo: courtesy of graur codrin/