Cutting combined operating costs and overlap is the main reason why big six energy supplier SSE (SSE) wants to merge with rival Npower/Innogy in the UK.

So it is instructive that management predict ‘greater than £100m’ of cost synergies, according to analysts.

Some number crunchers think these savings could be much bigger. Analysts at investment bank Macquarie have a base case £140m a year, and that implies combined group free cash flow of £215m leading to £180m or so of dividends for shareholders.

Another factor to consider is the potential for improving the Npower/Innogy margins, presumably from streamlined operations and modest price increases. Investment bank Berenberg calculates that this could add another £74m to any savings.

This all depends on the deal being approved by regulators, and that simply cannot be taken for granted. We would expect negotiations with watchdog Ofgem to drag on deep into 2018.

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