Low wattage

17 December 2018 By Christopher Thompson Follow @CGAThompson

The UK energy group’s plan to merge its retail unit with that of Germany’s Innogy collapsed, after a price cap undermined the transaction’s logic. Innogy can still do a deal with new owner E.ON. SSE’s transition to renewables looks murkier, and its generous payout more fragile.

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SSE and Innogy on Dec. 17 ended plans to merge their British retail distribution arms, saying they could not agree on new commercial terms after Britain's regulator proposed a cap on energy bills.

Last month SSE and Innogy warned that the deal, which would have created Britain's second-biggest retail power provider behind Centrica's British Gas, would be delayed after the government increased scrutiny of Britain's big power suppliers.

The deal was not in the best interests of its customers, employees and shareholders, SSE said. The company added that it would consider other options for its retail unit, SSE Energy Services, including a standalone demerger and listing, an outright sale or an alternative transaction.

“Adverse developments in the UK retail market and regulatory interventions such as the price cap have had a significant impact on the outlook for the planned retail company," Innogy board member Martin Herrmann said in a statement.

SSE shares were down 1.7 percent to 10.70 pounds by 1350 GMT on Dec. 17. Shares in Innogy were down by 1.4 percent to 40.51 euros.

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