LONDON, : British energy supplier SSE and German-owned Npower said Wednesday they have agreed to merge their businesses that heat and light up millions of UK households.

SSE, the second largest energy supplier in Britain, said it would spin off its household energy and services business and combine it with Npower, the British arm of Germany's Innogy.

The combined firm would be "a new independent UK incorporated company to be held by SSE shareholders and with minority participation by Innogy", SSE said in a statement.

No financial details of the deal were provided.

But SSE said that, as of the end of September, the two businesses provided energy and related services to about 11.5 million UK customer accounts.

The announcement comes as Britain's biggest energy suppliers face a regulatory shake-up after the government recently said that a price cap would be imposed on energy tariffs that did not currently provide customers with good value.

SSE said the merger of the two gas and electricity firms would help cut costs and allow the companies to compete in a "competitive and regulatory environment".

Innogy chief executive Peter Terium said that Npower would be better placed to offer value to its customers and shareholders as part of a new company, taking into account the "competitive landscape and the uncertain political environment for energy retailers" in Britain.

He added in a company statement: "Innogy remains committed to the UK, as we have a strong UK renewables business which we intend to further expand, in particular through investments in wind projects."

Completion of the deal, subject to shareholder and regulatory approvals, is expected by between late next year and early 2019.

"The new (stock market) listing will be born into a difficult environment to say the least, but the prospect of cost savings, greater scale and a greater focus on retail activities should all" prove to be favourable, noted George Salmon, equity analyst at stockbrokers Hargreaves Lansdown.

SSE was the top early riser in London, with its share price jumping 3.5 percent.

It later slipped back however to trade up 0.4 percent at 1,415 pence on the British capital's benchmark FTSE 100 index, which was slightly higher overall.

Alongside Wednesday's announcement, SSE reported a slump in pre-tax profits for the first half of its fiscal year.

"The operating environment continues to present a number of complex challenges to manage, with significant political and regulatory intervention an ongoing feature of the energy sector," said SSE chairman Richard Gillingwater.-AFP