SSE Deal With Npower Should Benefit Shareholders

Morningstar equity analysts believe the efficiency benefits from the joint operations of SSE and Npower would be significant

Andrew Bischof 8 November, 2017 | 5:32PM

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SSE (SSE) announced that it will spin off its SSE Retail unit with Innogy's Npower to create a separate publicly traded UK energy company, which will have a market share of 22.5% of gas and electricity customers, rivalling British Gas' 27% share. The move will reduce the “big six” energy suppliers, which will be subject to energy price caps from 2019, to five. We view the combination as positive for shareholders, as the efficiency benefits from the joint operations would likely be significant.

SSE shareholders would hold 65.6% of the new entity. Germany’s Innogy (IGY) has been looking at ways to offload the unprofitable npower, and SSE has been trying to stem customer losses amid a competitive retail environment.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
innogy SE42.90 EUR0.00
SSE PLC1,305.00 GBP0.00

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Andrew Bischof  

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