Npower profit plummets due to heavy domestic customer loses

RWE Npower has reported a 65 per cent reduction in domestic supply profits due to a “steep decline” in the domestic business that has seen 300,000 customers leave the supplier.

Npower said profits have been slashed to £38 million for H1 2015 from £109 million in 2014 due to the continued impact of billing and process problems, customers moving to non-standard tariffs from standard ones and the drop in overall customer numbers.

The drop in domestic supply has been partially compensated by the improved performance of Npower’s Business, and Business Solutions arms, which have performed in line with expectations.

Overall, RWE’s generation and retail businesses in the UK have made a combined profit of £24 million in the first half of 2015, down from £35 million from the same period in 2014. 

RWE Generation UK posted an operating loss of £14 million from its UK power station fleet for H1 2015 compared to a loss of £74 million for the same period in 2014.

The improvement was mainly due to higher revenue from increased generation, stronger demand for conventional power to balance renewables generation, and its continued business efficiency improvement programme.

Npower’s chief executive Paul Massara said: “The first half of 2015 has been very tough for Npower’s domestic business, even though this has been balanced by the continued improving performance of our other businesses. We have continued activity to make sure all of our domestic customers are on the right product for them, meaning more than ever are taking advantage of cheaper, fixed length deals.”

“The main part of our drop in profits has been due to the continued impact of the systems issues that hit our domestic business last year. The challenges that we have faced where tougher than we expected but we know what the problems are and are taking the right steps to fix them.”

Npower has halved the high number of customer complaints it receives to their lowest levels since December 2011. It has routinely featured at the bottom of customer service leagues in recent years, only being overtaken by Scottish Power last year when it installed a new billing system that badly hit customer service levels.

Massara added that Npower supports the removal of the four tariff cap proposed by the Competition and Markets Authority’s provisional findings which he believes will enhance “one of the most competitive markets”, but is not in favour of a transitional safeguard tariff which he said would be a “retrograde step for one of the most liberalised markets in Europe.”

Npower’s German parent company RWE in part blamed Npower’s domestic supply performance for the 11 per cent drop in its operating profit for H1 2015 also announced today. It said it expects further “significant deterioration” of the domestic supply arm this year.