Big Six energy firms npower and SSE in advanced merger talks

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Big Six energy firms npower and SSE in advanced merger talks

On Tuesday, SSE confirmed that it has been in talks with innogy over creating a new independent energy supply company, which would combine both companies' household energy supply and services business in the UK.

The new business would merge SSE's household energy supply and services business in the United Kingdom with Innogy's British division, Npower.

As the cap is aimed at standard variable tariffs and default tariffs, it is expected to threaten the profits of some of the larger suppliers.

SSE shares rocketed from 1366p to 1422p when the news was announced, a rise of 4.0%, before falling back slightly. "But the real question is whether regulators would let this one pass, and it's hard to see it overcoming competition concerns", said analysts at ETX Capital.

SSE has said the discussions are "well-advanced" and continuing, however no final decisions have been reached and no binding agreements entered into.

Innogy said the combined business would be listed.

"SSE probably thinks it can harness the customer base for a bargain price since npower has been struggling for a while now".

Reuters reported Monday that innogy was looking to sell or combine Npower with a local rival, citing people familiar with the matter, in a bid to tackle the loss-making business.

Any deal would likely have significant repercussions on the UK's already competitive energy supply market.

Smaller suppliers account for more than 8% of market share, compared to 1% three years ago, according to Ofgem data.

Last month, the government asked the energy market regulator to come up with price caps on consumer gas and electricity prices for millions of households which will initially last until 2020.

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