Npower operating profits fall 26 per cent

Npower’s operating profits for last year came under significant pressure as the supplier sought to address its poor customer service record and meet rising network costs, parent company RWE said on Tuesday.

The UK arm of German energy giant RWE saw its operating result fall to €227 million (£162.5 million), 22 per cent below the previous year’s results and as much as 26 per cent lower when currency effects are taken into account.

“The UK supply business had to cope with a number of burdens,” RWE’s report said, including historically mild weather over the last year and “higher than expected” costs relating to a customer service restructuring.

The supplier also blamed rising network costs, which is recent weeks have also attracted criticism from MPs and rival energy supplier British Gas.

“Increased revenues from higher residential tariffs and extensive measures to improve efficiency only partially offset these burdens,” RWE said.

The wider group results showed an expected decline in operating results of 25 per cent on the year to €4 billion (£2.8 billion), due to the mild winter across Europe and “persistently low prices on the wholesale electricity market” which hit the group’s generation business.

“The crisis in conventional power generation continues,” said RWE’s chief executive Peter Terium.

“In spite of this, we will focus once more on growth opportunities in the future, but without losing sight of the need for strict financial discipline,” Terium said.

The company expects its 2015 results to follow the downward trend despite increasing efficiencies across its business, with the operating result for the coming year expected to erode by as much as 10 per cent.

The outlook is line with the consensus view of future results, which analysts at RBC Capital said was “reassuring” to the market.