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German energy giant RWE reported double-digit operating profit losses in its first half financial results, blaming unexpected problems in its UK supply arm as a key contributor.
Npower’s parent company said the 11 per cent operating losses to €2 billion for H1 were mostly as a result of continued decline in profit margins from its conventional generation fleet, but its otherwise positive performance in European supply was offset by heavy earnings losses on the UK supply arm.
Earnings from the UK supply business plummeted 60 per cent from €133 million in the first half of last year to just €53 million in H1 2015 with further “significant deterioration” expected this year.
In stark contrast RWE said that Europe-wide energy supply showed a positive trend, contributing €614 million Europe-wide to the operating result, up from €589 million in the previous half. In particular gas sales were positively influenced by more typical temperatures compared to the very mild weather in the same period last year.
“However, a counteracting effect was felt by burdens caused by unexpected operational and technical problems in the UK supply business,” RWE said.
The group now admits that Npower will fail to meet expectations of a modest full-year earnings gain compared to 2014 and close “significantly lower” year-on-year, and that its billing problems may only be completely resolved by the end of this year.
RWE blamed persistent problems with Npower’s billing systems for driving customers away from the business.
“We were often only able to retain residential customers with expired contracts by offering them new contracts with more favorable conditions,” RWE said.
The results confirm concerns within Npower that the company would fail to meet the publically stated goal of chief executive Paul Massara to top customer service league tables by the end of the year.
Massara stepped into the role of chief executive at the beginning of 2013, promising that the company would climb from the bottom of the customer service league tables to the top in just two years.
Npower has been dogged by customer service woes following the introduction of a new billing system which resulted in inaccurate and heavily delayed customer bills in 2013. As a result Massara was forced to make a public apology to Npower’s 3.4 million customers, and the company was ordered to pay a fine of £3.5 million to Ofgem.
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