Npower owner warns of losses amid fierce UK competition

NPOWER will remain a drain on its German parent company this year as the Big Six supplier continues to sell energy at a loss to defend its share of the increasingly competitive market.

Innogy, which is owned by RWE, said the UK business dragged earnings in its retail arm down 8pc to €588m (£535m) in the first half compared with a year ago. Npower’s adjusted earnings before interest and tax slumped £78m to a loss of £11m in the period. Innogy warned that deeper losses could emerge if regulatory action on standard energy prices led to a price cap on bills.

“The sword of Damocles still hangs over all of this, in the form of further regulatory intervention by the UK Government,” said Bernhard Gunther, Innogy’s chief financial officer.

The German energy giant kicked off a restructuring of Npower at the beginning of last year, but the “very tough” competitive landscape means the company is likely to continue selling energy at a loss for the rest of the year. Profit data published by the regulator shows that Npower’s supply margins have plummeted from 3.4pc in 2015, against an aggregate of 3.94pc across the major energy suppliers, to a 6.75pc loss. At the end of last year the aggregate profit margin stood at 6pc.

The supplier has been forced to sell its energy at a loss to help fend off competition from a growing number of firms entering the market.

Npower’s troubles stem from a roll-out of a new IT system in 2013, which triggered a flood of billing errors and complaints as customers fled in their droves.

But following losses in the first quarter, Npower was able to claw back 50,000 new customers in the second quarter and slash the number of complaints. “Of the Big Six energy companies in the United Kingdom, Innogy’s retail brand Npower had the secondlowest rate of customer complaints, whereas it received the highest number of complaints in 2015,” the company said.