RWE restructuring hits Npower; company warns of further decline in 2016

Npower parent RWE is ramping up plans to restructure and streamline its conventional power generation and UK supply businesses. In a move expected to cause 2,500 job losses in UK supply, the company has stepped up a planned €2 billion restructuring, announcing cuts of €2.5 billion by 2018.

In its full-year results the company said earnings at its supply businesses were €824 million,sharply down from €912 million the previous year. The fall was attributed largely to operational and technical problems in the UK, where the supply business closed the year with an operating loss of €137 million. “The main reason was serious process and system-related problems in residential customer billing” and business and domestic customers switching away, the company said. It lost around 206,000 electricity accounts and 140,000 gas accounts over the year to 31 December 2015. “Measures to restructure the UK supply business have begun, and RWE expects further burdens in this area in 2016,” it added.

Across RWE a 2% fall in pre-tax earnings in 2015 was “smaller than expected” but that was because of one-off items. Overall income was down 12% on the previous year to €1.1 billion and the company has suspended its dividend.Chief executive Peter Terium said that, “With the price of base-load power currently just above €20/MWh on the forward market, nearly all of our stations are in the red.”

The company noted that removal of Levy Exemption Certificates for renewable electricity “curtailed our group’s operating result by about €20 million in 2015 and will reduce it by approximately €40 million per annum thereafter.”

RWE also warned that the current year would see “a considerable decline” thanks to lower margins at its fossil plants, with Ebitda “between €5.2 billion and €5.5 billion and an operating result of €2.8 billion to €3.1 billion”. “Our earnings forecast shows that RWE has not yet reached the low point,” said Terium.

The company said major restructuring of the company was on schedule, and a new subsidiary bundling renewables, grids and retail across the business will begin operating on 1 April.

On offshore wind, RWE said it would take a Final Investment Decision on the 900MW Triton Knoll wind farm in 2017.  This would require a total investment of up to €3 billion, and the decision “will largely depend on whether we qualify for state subsidies”.

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