SSE shares take a hit as viability of 'Big Six' energy supplier merger with Npower thrown into doubt

The merger between energy giants Npower and SSE could be left in a 'shambles' after the two firms announced they are re-negotiating the terms of their planned union.

The two 'Big Six' companies, set to join forces to create the UK's second-biggest energy company, say the agreement is being delayed due to the incoming cap on default tariff prices.

An energy bill price cap of £1,137 a year for 'typical usage' is due to come into force in 2019, meaning suppliers will have to cut the price of their default tariffs to £1,137 or less. 

SSE, a FTSE 100 company, plans to merge with fellow energy firm npower, with its shareholders holding a 65.6% stake

Energy experts at Jefferies Financial Group said the merger was left in a 'shambles', with worries for the future viability of the deal, which was recently given the nod by the competition watchdog.

The merger was initially hoped to be completed within March 31, 2019, but now the two firms say talks will take 'several weeks' although stress that it will take place.  

SSE chief executive Alistair Phillips-Davies insisted the group continues 'to believe that creating a new, independent energy supplier has the potential to deliver real benefits for customers and the market as a whole, and that remains our objective'.

Energy watchdog Ofgem confirmed on Tuesday that the energy price cap will come into force on January 1, saving consumers up to £120 each. 

Analysts at Jefferies said speculation suggested the deal was 'in trouble', but added it was unlikely just to have been caused by the incoming price cap.

They said: 'While price caps are a major headwind for UK energy suppliers, this issue is well known in the market and the level at which the cap has been fixed was widely anticipated across the sector.

'In our view, ongoing market share loss, mounting losses at Npower, the need to potentially inject capital in the new RetailCo, along with SSE's own weakened financial position as a result of its recent profit warning, have all likely contributed to putting this merger at risk.'

Talks between npower and SSE have been ongoing since October, when the two firms waived through the merger after conducting a full inquiry amid initial fears it could lead to higher prices. 

Under the proposed deal, the new company will be listed on the London Stock Exchange with SSE shareholders holding 65.6 per cent and Npower owner Innogy holding 34.4 per cent.

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November 09, 2018

Sources: Daily Mail

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  • Billion pound inflation blunder costs commuters and students, says House of Lords report

    Billion pound inflation blunder costs commuters and students, says House of Lords report

    thanks to a billion pound blunder in the way a key measure of UK inflation is calculated, a Lords committee has warned.</p><p>The committee said the flaw in the Retail Prices Index measure of inflation created clear 'winners and loses', while it called the Office for National Statistics' failure to fix it 'untenable'.</p><p>It is estimated the error, which has artificially increased the rate of RPI by about 0.8 per cent, has boosted holders of inflation-linked government bonds to the tune of around £1billion more a year in interest. </p><p>Students and rail passengers are being unfairly penalised by an openly-admitted error in the way a key measure of UK inflation is calculated, a Lords committee has warned</p><p>But it is costing commuters and students dear, as RPI is used to calculate annual increases in rail fares and student loan pricing. Train fare prices increased again this year, rising by 3.1 per cent.</p><p>The increase outpaced the 2.6 per cent rise in the average wage in 2018, and led to hundreds of pounds being added to the cost of some season tickets.</p><p>The committee also called on the Government to agree to use a single measure of inflation to prevent 'index-shopping' – where it cherry picks the measure that suits it best.</p><p>Lord Forsyth of Drumlean, chairman of the Economic Affairs Committee, said: 'The UK Statistics Authority's refusal to fix the problems it admits RPI has is untenable.</p><p>'By continuing to publish an index which it admits is flawed, it is arguably in breach of its statutory duty to promote and safeguard official statistics.'</p><p>This is Money has long argued that RPI is unfairly penalising commuters.</p><p>The ONS has used CPI as its preferred official measure since 2003 while RPI hasn't had 'national statistic' status since 2013.</p><p>Train companies are allowed to increase fares by RPI - and it has added hundreds of extra pounds onto the already sky-high annual cost of commuting.</p><p>He added: 'This is not just a technical debate. The authority's error created winners and losers.</p><p>'For example, commuters and students pay more because rail fare increases and student loan interest rates are linked to RPI.'</p><p>The committee claims the ONS openly admits the RPI error, but has refused to ask the Chancellor to approve a correction as it believes the Treasury will not want to upset financially index-linked gilt holders.</p><p>An ONS spokesman said the authority was aware of problems with the RPI, but confirmed it had still not written to the Chancellor to correct the error.</p><p>He said: 'We agree the RPI has significant shortcomings.</p><p>'We will therefore continue to work closely with our counterparts in Government and at the Bank of England and respond to the committee.'</p><p>The RPI error has been caused by a change in 2010 to the way clothing prices were collected, which has widened the difference between the RPI and the Consumer Prices Index.</p><p>The gap between the measures has encouraged so-called index-shopping, with the Government controversially switching from RPI to the lower CPI rate in 2011 for annual increases in benefits, tax thresholds and public sector and state pensions.</p><p>Lord Forsyth said: 'When the Government gives money to people it is generally opting to adjust payments for inflation using the CPI.</p><p>'But when it takes money from people, it is generally opting to use the RPI, which has been around one per cent higher than CPI in recent years.</p><p>Do you want to automatically post your MailOnline comments to your Facebook Timeline?</p><p>Your comment will be posted to MailOnline as usual.</p><p>Do you want to automatically post your MailOnline comments to your Facebook Timeline?</p><p> We will automatically post your comment and a link to the news story to your Facebook timeline at the same time it is posted on MailOnline. To do this we will link your MailOnline account with your Facebook account. We’ll ask you to confirm this for your first post to Facebook.</p><p>Part of the Daily Mail, The Mail on Sunday &amp; Metro Media Group</p>

    1 January 17, 2019
  •  China says economy czar to visit Washington for trade talks

    China says economy czar to visit Washington for trade talks

    shington on Jan. 30-31 for talks aimed at ending a costly tariff war over U.S. complaints about Beijing's technology ambitions.</p><p> The announcement Thursday that the official in charge of the Chinese side of the negotiations will participate in person is a possible sign of progress following talks in Beijing this month between lower-level officials.</p><p> Liu will visit Washington at the invitation of the U.S. Trade Representative, Robert Lighthizer, the Ministry of Commerce said. That suggested Lighthizer also might participate, a step economists said earlier would be a sign of determination to reach a settlement.</p><p> The two sides have raised tariffs on tens of billions of dollars of each other's goods in the fight over complaints that Beijing steals or pressures companies to hand over technology.</p><p> The three-day meeting this month in Beijing ended with no announcements of firm commitments or details of what the next step might be.</p><p> The talks are aimed at carrying out the Dec. 1 agreement by Presidents Donald Trump and Xi Jinping to suspend further tariff increases for 90 days while they negotiate, said Ministry of Commerce spokesman Gao Feng.</p><p> Chinese exports to the United States held up through much of 2018 despite Trump's tariff hikes. But they fell 3.5 percent in December compared with a year earlier as the penalties began to depress demand.</p>

    1 January 17, 2019

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