Npower has reported a sharp decline in earnings during 2019 after customers continued to leave the supplier in droves.
The company lost almost one in six of its domestic and commercial customers, with electricity customers falling by 346,000 to 2.11 million and gas customers by 266,000 to 1.37 million.
The figures were revealed by its parent company Innogy in its financial results for the year.
They showed the supplier’s losses in terms of adjusted earnings before interest and tax (EBIT) grew from €72 million to €206 million. When also discounting depreciation and amortisation (EBITDA) they increased from €21 million to €159 million. This was despite a nearly 12 per cent year-on-year rise in revenues to €7,896 million.
“The decline was mainly driven by regulatory intervention in relation to introducing the price cap for standard tariffs,” Innogy explained.
“Moreover, the tough competitive situation and related customers losses resulted in an erosion of margins, especially in the residential business. It was only possible to partially compensate for these negative impacts with efficiency-enhancing measures.”
Innogy said poor results were the main cause of a 23 per cent decline in adjusted EBIT across the whole of the group to €1,615 million. It forecast adjusted EBIT across its retail operations to rise from €250 million to €350 million in 2020, partly as a result of Npower’s ongoing reorganisation.
Eon acquired a majority stake in Innogy in September 2019 as part of a wider asset swap with RWE. Npower was originally expected to be merged with SSE’s retail arm, but the deal fell through at the end of 2018.
Last November, Eon outlined plans to absorb Npower’s residential and SME customers into its retail business in the UK, branded Eon Energy. The rest would continue to be served by a separate Npower, which would be restructured over the following two years.
In a fresh update issued earlier today, Eon UK said it would “reinvent itself” by a creating an entirely new supplier called Eonnext to which the residential and SME customers of both itself and Npower will be transferred – the former in 2021 and the latter starting in the second quarter of this year.
The new supplier will use the customer service platform of Kraken Technologies, the sister company of Octopus Energy. Last year, Good Energy became the first rival supplier to adopt the platform.
Commenting on its deal with Kraken Technologies, Eon’s chief operating officer Karsten Wildberger said: ”Eon is committed to successfully transforming Eon UK’s business and undertaking bold steps to use the advantages of the Kraken platform to enable it to be a more customer-centric, technology-led, and cost-efficient organisation.
“We are convinced this option offers our UK operations a sustainable future as well as bringing significant benefits to the entire group – not at least by using state-of-the-art technology and processes for the benefit of our customers.”
Eon UK chief executive Michael Lewis said: “We led the transition in the energy industry from fossil fuels to renewables, and today is no less a step to deliver more customer-friendly technology and to help serve our customers better, faster and with greater flexibility for the future energy market.”
And Greg Jackson, chief executive of Octopus Energy and director at Kraken Technologies, said: “Our mission is to help deliver lower costs, better service and greener energy globally.
“Eon’s decision to use our advanced Kraken technology platform for Eonnext will enable this for millions of customers in the UK and sets the stage for a wave of change in energy here and globally.”
Eon and Npower both cancelled their membership of Energy UK in December, saying they could “no longer afford” the annual subscription.