Gas and electricity giant Npower could be sold for up to £5bn after its German parent company RWE put its future under review.
RWE has hired investment bankers at Goldman Sachs to consider Npower’s future, according to reports, and the options on the table include putting the company up for auction.
Npower, which supplies energy to 6.8m homes, was bought by RWE in 2002 for £3.1bn. The company, which employs 11,000 staff and generates eight per cent of the UK’s electricity, last year made profits of £245m on sales of £7bn.
RWE, the second largest power company in Germany, is understood to be mulling a sale because it wants to pay down some of its large debt mountain.
Its chief executive, Jurgen Grossmann, has pledged to sell billions of euros of assets as the company struggles against the rising cost of carbon taxes and debt repayments, which led one rating agency to warn that profits could “materially decline”.
It also faces increasing costs of investing in green energy after the German government ordered the closure of its nuclear power plants in the next 10 years following the Fukushima disaster in Japan.
RWE is also understood to be increasingly dissatisfied with British energy policy as the Government prepares to unveil a new strategy designed to encourage more investment in nuclear power stations, wind farms and other low carbon technologies.
Energy secretary Chris Huhne will this month publish an energy white paper that will set out the blueprint for a £200bn low-carbon makeover of the industry. It is expected to include penalties on old fossil-fuel plants and provide subsidies for more expensive and cleaner alternatives. Companies are struggling to fund the costly new plants.
The sale of Npower could signal the start of a shake-up in the energy sector, which many analysts see as ripe for consolidation.
Iberdrola, the Spanish owner of Scottish Power, has already been tipped as a likely buyer.
RWE’s troubles also raise questions about Britain’s already delayed plans for a new fleet of nuclear power stations. RWE and Eon formed one of three consortiums behind plans for the plants.
However, sources said that RWE could still invest in the nuclear power projects even if it sells Npower.
RWE and Npower declined to comment.