ENERGY giant SSE is considering its future after a planned merger with fellow “Big Six” business Npower was abandoned.

The Perth-based provider had aimed to merge its retail arm with that of German-owned npower in a move which would have affected millions of consumers.

However, the deal is off amidst what SSE has called “very challenging market conditions”.

Announced more than one year ago, the merger would have created the second biggest domestic energy supplier in the UK market.

SSE will now consider several options for its household energy division – named SSE Household Service – including a standalone demerger and listing, a sale or an alternative transaction.

Chief executive Alistair Phillips-Davies said: “This was a complex transaction with many moving parts.

“We closely monitored the impact of all developments and continually reviewed whether this remained the right deal to do for our customers, our employees and our shareholders. Ultimately, we have now concluded that it is not. This was not an easy decision to make, but we believe it is the right one.”

The merger had been cleared by the competition watchdog.

However, last month the players indicated they were to renegotiate in light of the price cap brought in by Westminster, which is aimed at keeping bills for “typical usage” below £1137 per year.

Ofgem says the measure will help 11 million households save an average of £76 per year on their gas and electricity costs. The change is due to come into force in the new year.

Meanwhile, the merger was scheduled to take place in the first quarter of 2019. SSE said this factor, as well as the performances of the two providers, had led to the call-off.

In a statement, the firm said: “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.”

Phillips-Davies commented: “We are now exploring all the available options with a view to delivering this future in the best possible way.

“In this, the interests of our customers, employees and shareholders remain paramount.

“In the meantime, we remain strongly committed to high standards of service for customers and delivery of our five-year dividend plan for shareholders.”

Last month, SSE revealed widened losses for its household gas and electricity supplier and the loss of another 460,000 customer accounts as competition took its toll.

Those leaving were said to be switching to smaller providers and cheaper deals.

Remaining positive yesterday, Phillips-Davies said: “SSE Energy Services remains a profitable business with a strong track record, a customer-centric culture and an excellent team that has enabled it to be a market-leader for many years.

“We will build on this while continuing with separation activity in preparation for its long-term future outside the SSE group.”

Npower’s owner Innogy also reported falling customer numbers in the UK in November, saying it had lost around 500,000 accounts during the year and warning that the supplier will make a loss for the fourth consecutive year.

With the SSE deal off, it has now cut its outlook for the current year as a result of the necessary inclusion of npower in its accounts.

Adjusted earnings are expected to take a £225m hit.

Commenting, Innogy SSE’s chief operating officer Martin Herrman said: “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. We are now assessing the different options for our British retail business.”

Shares in SSE, which is listed in the UK, dipped by around 2% after the news broke.