Npower’s domestic and small business customers will be migrated to Eon, with its industrial and commercial arm spun off into a separate arm.

Eon’s chief executive Michael Lewis will take over leadership of Npower, with current chief executive, Paul Coffey, and chief financial officer, Dirk Simons, departing. Restructuring expert Mike Hawthorne will join the board in the new role of chief restructuring officer.

The plans follow the announcement of rising losses and a haemorrhaging of customers in the last quarter at Npower.

Eon acquired Npower as part of a wider asset swap with Innogy’s parent company RWE, after a proposed merger between Npower and SSE fell through.

In an announcement this morning (29 November), Innogy described Npower as being in a “critical and unsustainable business situation”.

Innogy chief executive Leonhard Birnbaum said: “The question of how to improve the performance of our retail business in the UK, Npower, has been a key issue for the past few years. I want to express my sincere thanks to our employees for their unceasing dedication to delivering a great service to our UK customers in a very challenging market.”

He added: “What became clear to the npower board and ourselves is that npower with its structural set-up and scale was not able to succeed by itself in this difficult market. This was the driving force behind the attempt to merge with SSE’s retail business and it is the reason why these changes have been announced today. Together with Eon, we now propose to reduce the cost of serving Npower customers by combining them onto one platform, an option that simply was not available in the past.”

Eon admitted that “regrettably it is inevitable that a transformation of this scale will have an impact on the workforce and it is likely these proposals will result in a significant number of job losses at Npower over the next two years”. The company has yet to comment on the extent of these losses but unions have estimated they could be as high as 4,500 of the currently 5,700-strong workforce.

Lewis said: “With Npower becoming part of the new Eon – creating the second largest supplier in the UK – we need to build a sustainable business with a lower cost base that allows us to compete in this extremely challenging market. We are proposing a number of steps to create an Eon business that can be both sustainable and successful for the future whilst also fully supporting and serving our customers today.

“For Npower and its employees, these proposals will mean significant changes. We’re aware of the impact these proposals will have and there will be appropriate levels of employee support at this time. Npower will now consult and work with trade unions and employee representatives on all these proposals and we are committed to mitigating impact on colleagues.

“The background to these decisions is of course the unprecedented upheaval in the energy market: in the last 18 months we have seen almost one third of suppliers going bust or continuing to operate at a loss. What we’re announcing today is our response to this difficult situation in order to remain sustainable.”

Unite called the scale of the proposed job cuts “horrific”. Its national officer for energy and utilities Peter McIntosh said: “This devastating news is about maintaining profits for the benefit of shareholders and nothing about the service to customers.

“The case for taking the energy companies back into public ownership has been reinforced by this announcement from Npower today. Public ownership will ensure that energy provision and supply are run in the best interest of consumers and not primarily for profit hungry shareholders.”

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