RWE to outline Npower overhaul in March

RWE is set to announce details of a ‘comprehensive restructure’ of Npower next month, as it seeks to cut costs across the business by €2.5 billion by 2018.

The German energy giant is overhauling its global business, with an Eon-style split of traditional generation from supply, grid and renewables operations announced at the end of last year. It has already exceeded its own incremental cost cutting targets, and has now raised the total target by €500 million to €2.5 billion.

RWE has also announced a suspension of dividend payments to common shareholders for the 2015 financial year, blaming the decision on a “continued collapse” in power prices and “political risk”.

In the update released today, RWE said: “The company intends to initiate additional measures to improve its operational strength. The focus lies on conventional power generation and the UK supply business, which will be restructured comprehensively.”

An RWE spokeswoman said details of the restructure would be announced at the full-year results on March 8, and would build on the reorganisation of Npower that began with former chief executive Paul Massara’s departure last summer.

The spokeswoman said the bulk of the extra €500 million savings announced today would come from Npower’s supply business and from traditional generation, including that in the UK. The group recently sold Lynemouth power station to Czech utility EPH, and the spokeswoman said it would be open to conversations about further divestments at the right price.

RWE gave a preview of key figures from its full year results today, though it said the figures were unaudited. They included a €2.1 billion writedown on its UK and German power stations; an operating profit of €3.8 billion and an adjusted net income of €1.1 billion.

The company predicted a further fall in earnings in the current year, forecasting an operating profit of €2.8 to €3.1 billion and an adjusted net income of €0.5 to €0.7 billion.

Jefferies Analyst Ahmed Farman said: “A 40 per cent to 50 per cent year-on-year dividend cut was largely expected, but not a complete suspension. However, the dramatic fall in German power prices and policy risks has meant that there was downside risk to both our and consensus dividend forecasts… Under the current challenging and uncertain environment, the company’s decision to hold on to cash to strengthen its balance sheet is prudent, in our view.”