E.ON has successfully acquired Npower through its parent company Innogy in 2019 and was thought to be a big move in the energy industry. However, along with the acquisition comes controversies that hound each firm involved in the deal.
While Npower and Innogy have had their fair share of woes and blunders, E.ON is not spared of issues concerning its retail arm. Reports of plummeting earnings because of the challenging market have surfaced in the past year, begging the question of whether the buy-out was just a façade to hide more significant problems within the company.
Here’s a look into some of the pressing troubles that E.ON, Innogy, and Npower have faced in recent history.
UK-facing energy supplier Npower bore heavily on its parent company Innogy’s performance and metrics. The 2019 first-half revenue of Innogy was cut by over a quarter (26.3%) because of the bleeding losses suffered by Npower.
The year 2019 looked bleak for the said companies. For the first six months, Innogy amassed £453 million net income right after the quadrupled retail losses of its UK retail arm amounting to £75 million. In just the first quarter alone, roughly £30 million shortfalls were reported.
Innogy and Npower chalked it up to the increasingly demanding market conditions that every UK energy retailer has been facing in recent years. Challenger firms have come forward with enticing deals, along with the promise of more personalised customer experience.
Additionally, the industry regulator Ofgem has set a price cap on standard variable tariffs (SVTs), which made supplier’s margins skinnier, considering that wholesale costs have increased.
Year-on-year, Npower lost about 240,000 customers, which further aggravated the company’s already dire situation.
Innogy CFO Bernard Güntherstated that the performance of other divisions such as renewables and infrastructure remained on track. However, Npower dragged the parent company’s UK retail side despite the other units doing well in the market.
With Npower causing blunders, Innogy’s overall performance would be affected whether they acknowledge it or not.
Uwe Tigges, Innogy CEO, pointed at the infrastructure division as the company’s backbone, signalling the value it adds to the company. While revenues for its renewables and grid and infrastructure units slipped, material developments drove the firm forward. During that period, a 1.4GW facility was underway, and several subsidy-free renewables were being developed.
It’s not only Innogy that grumbled over its retail performance in the past year. German-owned E.ON UK reported a 78% drop in its second-quarter earnings to £11 million.
Like other suppliers, E.ON blamed the plunge on Ofgem’s price cap on SVTs as the main culprit for the firm’s losses.
There was a dramatic decrease in its number of customers—about 400,000 left for other suppliers in the first quarter. Another 170,000 customers quit the company in the second quarter.
However, E.ON released a statement saying that more customers joined in July.
The company pledged to supply renewable electricity for its 3.3 million consumers in Britain. While that could have helped pick up the numbers, E.ON acknowledged that the energy market became particularly challenging to see any drastic incline.
In the first half of 2019, E.ON’s underlying retail earnings in the UK dropped by 65% at £65 million. The imposed price cap posed a threat to its annual revenues, which sat significantly below its previous year’s numbers.
E.ON’s retail customer solutions division was halved in the first half of that year, dropping to £221 million from £439 million in 2018. However, CFO Marc Spieker stated that the firm responded to the demands of the challenging market by offering new products and vivid cost management.
There was also an 11% decrease in its staff numbers due to restructuring efforts in the UK and broader Europe, leaving employees to be reassigned elsewhere.
E.ON’s problems aren’t something to be ignored, but the acquisition pushed through despite both parties struggling in the current energy market. Experts are yet to look into the effect of the takeover, whether it has benefited both companies or left them dealing with more woes than they can handle.