NPower’s £427m hit for German owner ahead of SSE tie-up
14th November 2017 | Residential Energy
The owner of Npower has taken a £427m hit on the value of the lossmaking utility just days after striking a deal with Scotland’s SSE to merge their operations to create a new energy supplier in the UK. The writedown by Germany’s Innogy came amid what it described as “very tough” competition and as gas and electricity suppliers brace themselves for the UK Government’s introduction of a price cap on domestic energy tariffs.
Innogy said it was confronted by a “difficult situation” in the UK. “The competitive landscape in the UK retail business remains very tough and pressure on margins is very high”, it said. “The UK government has initiated recently the legislative process to introduce a general price cap for standard variable tariffs (SVTs) and is proposing an expansion of the existing price cap for vulnerable households”.
Innogy said the goodwill impairment “reflects the deterioration in commercial assumptions and tougher regulatory conditions.”
The comments came as part of Innogy’s results for the nine months ending in September, where it reported UK retail revenues had tumbled 17 per cent to €4.99 billion (£4.45 billion). Adjusted earnings for the group rose 5 per cent to €3.1 billion over the period, despite losses on UK earning deepening to €33m compared to a loss of €6m last year.
Innogy’s group revenues also dropped 2.1 per cent to €30.8 billion for the nine months.
Bernhard Gunther, Innogy’s chief financial officer, said, “The past nine months show that our earnings position has continued to show robust development. “And 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.”
The deal to bring together operations at SSE and Npower would see a new company listed on the London Stock Exchange with SSE shareholders holding 5.6 per cent and Innogy 34.4 per cent.
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