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Utility Week 7th September 2018

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UTILITY WEEK | 7TH - 13TH SEPTEMBER 2018 | 7 News SSE SSE is a listed company with generation, network transmission and distribution and retail activities in the UK and Ireland. Prior to the proposed merger SSE separated out its activities in the retail supply of electricity and gas to domestic customers in Great Britain. SSE's contribution to MergeCo: and listing of the new company is on track for completion by the end of SSE's financial year," he says. The merger will create the second-largest energy supplier in the British market – with a share of around 24 per cent. Greg Jackson, chief executive of inde- pendent supplier and challenger Octopus Energy, says: "Consolidation alongside leg- acy companies is a natural transition – we've seen it in airlines, and now we're seeing it in energy. The best of the challengers will keep growing, bringing lower prices and better service to millions of customers. "If the big six becoming the big five does anything for customers it will need a funda- mental shi in opaque practices such as loy- alty penalties and one-sided contracts with exit fees." The CMA is now seeking views and evi- dence on its provisional decision by 20 Sep- tember 2018 before coming to a final view. The statutory deadline for the CMA's final report is 22 October 2018. With it looking increasing likely the com- panies will get full clearance, the finishing post is surely now coming into view. Npower Npower is a UK company, fully owned by Innogy SE (Innogy), which is active in the retail supply of domestic and non-domestic gas and electricity and energy-related services in Great Britain. Innogy is a European energy group active in renewable energy generation, electricity and gas distribution, and the retail supply of energy. Innogy is listed on the Frankfurt Stock Exchange, and is majority-owned (76.8 per cent) by RWE AG (RWE). Npower has an exclusive wholesale supply and services agreement with Telecom Plus for the supply of gas and electricity to Utility Ware- house, a mid-tier energy supplier. Npower's contribution MergeCo: Retail OpCo (formerly SSE Wales Electricity) Southern Electric Gas Ltd SSE Retail Telecoms Ltd Retail OpCo (formerly SSE Wales Electricity Ltd) SSE Home Services SSE Metering Ltd SSE Energy Solutions Ltd Domestic electricity supply Domestic gas supply Boiler and central heating services Domestic telecoms Provision of Energy Company obligation Standard and smart metering services SSE plc Retail Holdco Innogy Solutions Ireland Ltd Npower Ltd Npower Yorkshire Ltd Npower Northern Ltd Npower Direct Ltd Octopus Electrical Ltd Npower Business and Social Housing Ltd Npower Commercial Gas Ltd Npower Gas Ltd Npower Financial Services Ltd RUMM Ltd Plus Shipping Services Ltd IFS Energy UK Ltd Electricity market share Gas market share Q1 2004 Q1 2018 Q1 2004 Q1 2018 25% 20% 15% 10% 5% 0% 25% 20% 15% 10% 5% 0% British Gas EDF Eon Npower Scottish Power SSE Utility Warehouse Ovo First Utility Utilita Co-Operative Energy Green Star Energy Bulb Small suppliers Key CMA findings • If SVT customers switch, they usually change to a cheaper, non-SVT, tariff. • The risk of losing customers as a result of an SVT price rise will not change with the merger. • Evidence that few customers switch between SSE and Npower, instead pre- ferring to move to other suppliers. • SSE and Npower do not compete closely on SVT prices. The transaction On 8 November 2017, Innogy and SSE entered into an agreement to transfer Npower and SSE Retail into a new com- pany. The combined retail company will be listed on the premium segment of the London Stock Exchange and will not be controlled by either Innogy or SSE. Innogy will receive a 34.4 per cent equity stake in MergeCo, which it will be required to hold for at least six months, and SSE'S stake of 65.6 per cent will be distributed to its shareholders imme- diately following the transaction. SSE shareholders backed the proposed merger on 19 July, following the publication of a circular in which the company's chair- man Richard Gillingwater urged them to vote through the deal. Innogy SE Innogy Int Participations NV Npower group plc Source: CMA Source: Ofgem Source: CMA

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