Energy firms Npower and SSE (LON:SSE) have been in talks with potential plans to create a brand new energy giant.
If the two firms are to combine, it would create a new independent firm with 13 million customers. SSE has confirmed that the talks are “well advanced”.
The two companies currently count as two of the “big six” energy companies who dominate 80 percent of the energy market. The merger is likely to raise competition concerns.
“The discussions between SSE and [npower owner] Innogy are continuing and are well-advanced but no final decisions have been taken and no binding agreements regarding the terms of any combination have been entered into,” said SSE in a statement.
A merger would have the combined SSE and Npower becoming a tight competition with British Gas, which currently has 27 percent of the gas and electricity supply market. The merger between SSE and Npower would have a market share of 22.5 percent.
Analysts have understood that the merger would mostly benefit SSE.
“We see this as a positive move for SSE and Innogy, although the relative scale of the UK supply operations within both entities means SSE is significantly more exposed to any upside,” said analysts at RBC Capital Markets.
Both of the companies have opposed Theresa May’s promises to introduce price caps on energy prices. SSE has been to found to have a high proportion of its customers on poor-value tariffs.
A spokesperson from Ofgem, the energy regulator, said: “Our role is to represent the interest of consumers. It is not part of our jurisdiction to decide on a merger. However, we would advise relevant authorities if we were concerned that a merger would not be in consumers’ interests.”
As the potential deal was announced, SSE’s share price jumped by over 3 percent.