SSE and Npower (owned by Innogy) have agreed to merge SSE’s household energy and energy services business to form a new independent retail energy company.

Innogy will hold a minority stake of 34.4 percent in the business, while SSE plans to demerge its 65.6 percent stake to its shareholders upon completion of the transaction.

Last week Ofgem published its annual ‘State of the Market’ report, giving its assessment of how well the energy market is working for consumers in terms of competition, affordability, decarbonisation, and security of supply. In it, Chief Executive Dermot Nolan observed: “Energy markets are rapidly changing to meet our need for clean, secure and affordable energy and to accommodate a transformation in the way we consume energy. The pace and scale of changes are unlike anything we’ve ever seen in the sector.”

Chief Executive, Alistair Phillips-Davies said “As someone who has worked in the energy industry for a long time, I’d agree with him. Change is becoming one of the only constants in our sector. That’s why we have a stated commitment to embrace change in each of our businesses, adapting them to the political, economic, social and technological requirements of customers and of society as a whole. That’s what this morning’s announcement is all about.”

“The Board has been undertaking a strategic review of our household energy supply and services business in the GB market and reached the conclusion that a separation has strong strategic logic and the potential to drive real benefits for the business and its customers. We are very proud of what we’ve delivered as a Group over many years; but the scale of change in the energy market means we believe a full separation of our household energy and services business in Great Britain and the proposed merger with npower’s household and business energy supply and services business in Great Britain, will enable both the new Retail business and the remaining SSE to focus more acutely on pursuing their own dedicated strategies, and will ultimately better serve customers, employees and shareholders.”

“SSE will remain a balanced group of related businesses, specialising in the energy, infrastructure and services needed to support the transition to a lower carbon future, but continuing to serve business and customers on the island of Ireland, whilst the new company will seek to combine the best of both retail businesses and be better placed to face the challenges – and pursue the opportunities – emerging in the energy market in GB. It will be more agile, innovative and efficient with a dedicated management team and a complete focus on retail customers.”