SSE ENERGY SERVICES TRANSACTION NOT PROCEEDING

[idpickering]

SSE ENERGY SERVICES TRANSACTION NOT PROCEEDING

· SSE Board has determined it is not in best interests of stakeholders to proceed with proposed SSE Energy Services/npower transaction

· SSE and Innogy SE unable to reach agreement on revised commercial terms

· SSE Energy Services expected to be profitable and cash flow-positive in 18/19 and 19/20

· Work to separate SSE Energy Services to continue, while other options are considered

Following further discussions, which were announced on 8 November 2018, regarding potential changes to the commercial terms of the proposed combination of SSE Energy Services and npower Ltd ("the new company"), the Board of SSE plc has today decided it is not now in the best interests of customers, employees or shareholders to proceed with the transaction.

The Board has therefore decided that other options for SSE Energy Services should now be considered, including a standalone demerger and listing on either the premium or the standard listing segment of the Official List, a sale or an alternative transaction.

While the Board believed strongly in the new company's potential to deliver benefits for customers and the wider market, it does not now believe the new company would be in a position to meet trading collateral requirements in a sustainable way; and does not now believe the new company would be capable of listing on the premium segment of Official List and Main Market of the London Stock Exchange.

The transaction has been impacted by multiple factors including the performance of the respective businesses, clarity on the final level of the default tariff cap, changing energy market conditions and the associated implications of these for both the joint business plan and the market in which the business would be operating. These implications meant the new company would have faced very challenging market conditions, particularly during the period when it would have incurred the bulk of the integration costs.

SSE Energy Services is expected to be profitable and cash flow positive in 2018/19 and 2019/20 and continues to deliver strong performance for customers, across a wide range of measures. These include ranking second of 34 suppliers in the most recent Citizens Advice energy supplier performance rankings, industry-leading performance on Guaranteed Standards and ranking best for complaint handling in Ofgem's 2018 customer satisfaction survey.

SSE believes that SSE Energy Services will be best positioned to build on this strong performance in a future outside of the SSE group. With that in mind, SSE will continue to build on the significant work done to date to separate SSE Energy Services as an independent, self-sufficient entity within the group, in preparation for its future outside it.

https://www.investegate.co.uk/sse-plc-- ... 00066450K/

[Dod101]

I now have no holding in SSE but this is hardly good news surely. Basically, n power has I assume walked away.

Dod

[idpickering]

I now have no holding in SSE but this is hardly good news surely. Basically, n power has I assume walked away.

Dod

I'm not sure of the ins and outs of this, but that might be a possibility. I hold SSE, but grudgingly so sometimes.

Ian.

[monabri]

I now have no holding in SSE but this is hardly good news surely. Basically, n power has I assume walked away.

Dod

I'm surprised if it were Innogy who had walked ( it may be, though, time will tell). Innogy would be very keen to offload nPower after 3 years of losses. Both SSE and Innogy wanted rid of a difficult part of their businesses.

Disc: no holding.

[Walrus]

I actually think this is positive news, though I'm hoping the continuing to look for opportunities to get rid of SSE services is merely to save face. I genuinely can't see how this transaction will generate shareholder value.

[Arborbridge]

I actually think this is positive news, though I'm hoping the continuing to look for opportunities to get rid of SSE services is merely to save face. I genuinely can't see how this transaction will generate shareholder value.

Neither do I - but wasn't it to mitigate against Corbynism? If it was, SSE shareholders may all be the worse off.


Arb.

[Raptor]

Earlier this year I was considering getting rid of some of my SSE shares as they had become a larger part of my income than I was happy with, but the proposed disposal meant I did not need to do anything as this would have taken care of that worry.

All my shares are in tax sheltered accounts so will have to make a decision on what to do when I next do a review of my portfolio. Normally this review will be at end of financial year but will think about it over the next month.

See what happens when you no longer add to your portfolio.

Raptor.

[tjh290633]

Now that is resolved, it puts SSE back on my top-up list, either at the top or very near.

TJH

[dspp]

I don't think this is resolved, indeed the announcement makes clear it is not "Work to separate SSE Energy Services to continue, while other options are considered". They still need to get shot of the bit that is most hostage to ill-thought-through political actions.

My guess is that antitrust concerns created too big a price to pay for both sides, probably complicated by the RWE-EON merger/asset swap at European level. Nonetheless the underlying rationale, to build scale in the consumer-facing business sufficient to compete with Centrica, has not gone away.

In addition the wave of new-entrants that are going under gives cause for price rises to feed through to consumers. Hence profits. But that is likely to be short term.

I expect them to have another go at splitting the business in due course.

I have held SSE and CNA throughout and am still holding.

regards, dspp

[Dod101]

Certainly if you believe their announcement they intend one way or another to dispose of the retail side, so it needs to be regarded as a setback. The reasons for it, said and unsaid I think, were that a host of retail customers are just too much hassle and the energy cap would restrict their ability to squeeze more money out. I suspect as a major player in the energy market SSE with or without the retail bid would still be very much in Corbyn's sights.

Dod

[daveh]

I now have no holding in SSE but this is hardly good news surely. Basically, n power has I assume walked away.

Dod

I think SSE has walked away. Basically the SSE retail business was profitable and they say will be profitable again next year. The Npower business was a basket case and was haemorrhaging cash, but SSE thought that better management and greater scale could turn the Npower business around. However, with the Cap coming in, they wanted to renegotiate so that the terms were more favourable for SSE shareholders. I assume that means they thought the Npower business was a poorer business, would be more difficult to turn around and would be affected worse by the Cap than the SSE business so Innogy should get a smaller share of the final pie as they were bringing poorer ingredients to the kitchen.

As an SSE customer I'm pleased as I've always had good service from SSE and have heard that Npower customer service was/is atrocious and was a bit worried that the combined company would lead to poorer customer service. As an SSE shareholder I was worried that they wouldn't be able to turn around the long term loss making Npower business.

Edit: And my guess is that they will still hive off the retail side as a separate company, just without the Npower business.

[Dod101]

I too am an SSE customer and have never had any need to know whether their service is any good or not. Simple. They supply my electricity, they send me a bill and I pay. End of.

As I said I sold my SSE shares and so any discussion is academic to me but as I recall it SSE were keen to divest the retail side. I will watch with interest to see how this develops.

Dod

[moorfield]

Hang on. Didn't we (the shareholders) vote for SSExit ?

I demand another vote so we can make up our minds properly.

And presumably SSE is going to have to restate its dividend plan now, and quickly.

[Dod101]

And presumably SSE is going to have to restate its dividend plan now, and quickly.

Presumably they will simply to revert to their previously stated plan which was to increase each dividend by at least RPI.

Dod

[daveh]

I too am an SSE customer and have never had any need to know whether their service is any good or not. Simple. They supply my electricity, they send me a bill and I pay. End of.

As I said I sold my SSE shares and so any discussion is academic to me but as I recall it SSE were keen to divest the retail side. I will watch with interest to see how this develops.

Dod

I have had to deal with SSE on more than one occasion. Living in the Scottish countryside we occasional get less than ideal weather conditions and the supply of electricity very occasionally stops. I've always been able to phone them up, get through straight away and get accurate info on the fault and when it will be fixed. They have always got back to me with updates and they have so far been always been inaccurate with their estimates on how long it will take to fix in that power has so far always come back ahead of their predicted time. On billing the one time I was unhappy with a change they planed to make to my direct debit I queried the amount they'd changed it too, made a reasoned argument why it should be less, they agreed and made that change. I was hearing complaints at about the same time of Npower hiking direct debits and not listening to their customers. I know I don't have any choice about who manages and repairs the local distribution network, but SSE are doing a good job of that and the billing and I'd like it to stay that way.

[tjh290633]

People might like to think back to the time when BG Group demerged its pipeline business as Lattice, in October 2000. That was later absorbed by National Grid, forming National Grid Transco, almost exactly two years later. The share price barely moved, from 150p to 167.5p, at a time when the FTSE was falling, from about 6,400 to about 4,000. NGT/NG. has subsequently risen from 453.25p to the current 835.3p.

I just wonder what the performance of the demerged entity might be.

TJH