German utility firm Innogy said it would attempt to counter “very tense” trading for the UK retail business by driving down costs, but admitted annual earnings would be stuck in the red.
It said the forecast did not factor in the prospect of “further regulatory intervention in the UK retail business” such as through a price cap on standard variable tariffs.
The update came as Innogy revealed that half-year earnings rose 2 per cent to 2.4 billion euros (£2.2 billion), but saw external revenues drop 5 per cent to 21.7 billion euros (£19.7 billion) over the period.
Revenues in the firm’s UK retail electricity business fell 19 per cent to 2.8 billion euros (£2.5 billion) during the first six months of the year, while the gas arm slumped 22 per cent to 855 million euros (£775 million).
Npower came under fire in February from the Government and the energy regulator after announcing plans to hike gas and electricity prices by 9.8 per cent- a move that added £109 to annual dual fuel bills.
Focusing on Npower’s performance, Innogy said: “The restructuring programme initiated at the beginning of 2016 led to a reduction in the cost base in the first six months of 2017, but the competitive landscape there remains very tough in the retail business.
“Following customer losses in the first quarter, however, some 50,000 new customers were acquired during the second quarter.
“Improved service performance also came to bear here: there was a marked reduction in the number of customer complaints.
“Of the Big Six energy companies in the United Kingdom, Innogy’s retail brand Npower had the second-lowest rate of customer complaints, whereas it received the highest number of complaints in 2015.”
Innogy said the number of UK electricity customers fell by 3 per cent to 2.82 million in the six months to June, while UK gas customers slipped by 2 per cent to 1.93 million.
The chief executive of Innogy also dismissed talk of new, large-scale consolidation in the European utility sector, saying recent media reports about the matter were fuelled by fee-hungry banks.
“There is more being written about it than there is substance to it,”
Peter Terium said, responding to reports that parent RWE was in talks with France’s Engie about selling its 76.8 per cent stake in Innogy.
He added: “Of course, there are numerous banks out there that want to advise because it is in their interest and because they want to cash in on fees. There is no commercial basis for any of this.”
Energy watchdog Ofgem said in July that it was considering introducing a price cap on bills as part of new proposals aimed at protecting vulnerable consumers.
A “safeguard tariff”, which would protect such customers from overpaying for their energy, is one of a number of options mooted.
The Conservatives promised a wider energy price cap that would benefit 17 million customers before the general election, but the policy did not appear in the Queen’s Speech following Prime Minister Theresa May’s failure to win a majority.