Energy provider SSE has confirmed it is merging its British domestic business with Npower to form a new independent company.
SSE says the transaction, which will knock the ‘big six’ energy companies down to just five, will create an efficient new energy supply and services business, and help create a new market model by combining the resources and experience of two established players.
The company said it would help them compete in a "competitive and regulatory environment" as well as realise efficiency savings.
Alistair Phillips-Davies, chief executive of SSE, said: "We are very proud of what we've delivered as a Group over many years; but we have been and remain committed to taking the right decisions in each of our businesses to secure the right outcomes for energy customers and other stakeholders.
"The scale of change in the energy market means we believe a separation of our household energy and services business and the proposed merger with npower will enable both entities to focus more acutely on pursuing their own dedicated strategies, and will ultimately better serve customers, employees and other stakeholders.
"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 Irish customers; whilst the demerged retail business will build on a history of operational excellence and first-class customer service to pursue its own dynamic strategy for GB customers.
"This process is likely to take some time and in the interim we remain absolutely focused on the critical job of delivering for customers."
SSE's shareholders will hold 65.6% of the new company, with Innogy, which owns Npower, holding the rest. Innogy will also receive a £60m break fee if SSE's shareholders do not approve the deal by 31 July next year.
SSE has said that no final decision on the implications for employees would be taken without talks with their representative bodies.