Npower has inflicted a €480m (£427m) writedown on its German parent company, Innogy, which it blamed on the worsening UK energy market and Prime Minister Theresa May’s price cap.
Innogy said the planned merger of Npower and the UK’s second biggest energy supplier, SSE, had not affected its assessment of the reduction in the value of the business.
The German energy giant reported earnings before interest and tax up 9% to €2bn for the first nine months of 2017, but the results showed what a burden its UK retail business has become.
Npower lost customers and earnings declined, leading Innogy to conclude: “The competitive landscape in the UK retail business remains very tough and pressure on margins is very high.”
The company acknowledged the growing political heat, with the Conservatives, Labour and SNP all calling for some form of energy price cap.
“The difficult market conditions and political pressure have intensified over the course of the year,” Innogy said.
The company warned it would cut costs further in the face of stiff competition from smaller challenger firms and May’s price cap, which is likely to start in early 2019.
“Overall, in the retail division, Innogy intends to counter this [regulation and competition] with additional efficiency measures and therefore currently maintains its outlook,” it said.
It did not specify whether those measures would involve job losses, although industry figures have said the price cap risked having that effect.
Bernhard Gunther, Innogy’s chief financial officer, said: “We are making good progress, also in the UK. Despite the difficult situation on the UK market, Npower is a strong part of the planned combined retail company with SSE.”
Innogy was one of the firms to recently secure a record low price from the UK government for power from an offshore windfarm to be built in the early 2020s.
Separately, France’s EDF Energy revised down its earnings target for 2018 from at least €15.2bn to €14.6-15.3bn. The company blamed a reduced availability of its nuclear power stations and the expectation of reduced electricity consumption in France next year.