Eon has made drastic measures to stave off the bleeding losses at Npower, with more job cuts and the removal of Npower CEO Paul Coffey from his post after 17 years of service at the firm.
These actions are part of the plan to make Npower more profitable and recover from loss through restructuring the said energy firm.
Eon picked up Npower after an asset swap with RWE, its parent company, took place. Eon acquired a 76.8% share in Innogy, while RWE took a 16.67% stake in Eon.
It is now eyeing a £500 million restructuring plan as the best course of action to save Npower, which unfortunately leads to a hit for the workforce of the ‘wounded’ energy firm.
Earlier in 2019, Npower reported an €81 million (£75 million) operating deficit for the first half, shedding around 238,000 customers compared to 2018’s first six months. The parent company Innogy cited the domestic price cap and competitive pressure in the UK market as the primary factors for this turn of events.
Npower’s Restructuring Plan
Johannes Teyssen, Eon chief executive, stated the company would merge and upgrade only a single IT infrastructure instead of keeping two separate teams and computer systems. The firm plans to join the back-ends of Npower and Eon but maintain the separation of Npower’s business customer unit.
Tyssen said the firm has held discussions with staff and unions but declined to confirm how many jobs would be sacked as a result of the restructuring.
However, the target group that would likely be affected by the plan are the 4,500 business-to-customer (B2C) workers in the UK, which includes three call centres in Worcester, Hull, and Houghton-le-Spring near Sunderland.
There are 600 workers in each of the offices at Worcester and Hull, while 2,500 jobs in the Houghton-le-Spring call centre are expected to be at risk.
The remaining Npower UK sites are at Birmingham, Leeds, Solihull, Swindon, and Oldbury.
Mike Lewis, Eon UK CEO, will be overseeing both companies, which subsequently leads to the removal of Npower CEO Paul Coffey after being in service for 17 years.
Resolving Npower’s Future
Eon announced in September that the company plans to move swiftly to address the ‘bleeding wound’ that is Npower’s retail operation losses.
Tyssen said the UK market’s energy retail had met many challenges in recent years, citing slim margins, price caps and high churn rates as some of the issues that have aggravated the situation.
Tyssen stated the UK energy firms have all been affected, including Eon. Npower’s unstable position was further exacerbated by the interventions made in the regulatory market.
Innogy has previously announced its intention to cut as much as 900 jobs within its retail division in the UK. The company was open to winding down operations and selling off its customer book but was weighing in on the decision to sell the failing energy firm.
Tangible features related to Npower’s situation, such as data, can now be accessed under Eon’s control. It has enabled the company to devise quick countermeasures, which consequently affects thousands of existing Npower workers.
Eon is set on implementing the restructuring plan for two years to achieve a cash-positive status by 2022.
Unions have called the looming employment cuts as a cruel blow to the staff, especially that it is happening in a few weeks leading to Christmas.
A Word from Innogy’s CFO
Innogy chief finance officer Bernhard Günther was asked in an analyst call regarding Npower’s failing performance compared to the Big Six in recent years leading up to its situation today, and he cited the past restructuring as the culprit.
Günther stated the energy retailer had lost a lot of customers due to its B2C division, primarily cost-driven since there were a lot of fixed expenses to cover. He said that Npower’s fixed cost base is comparable to the other big power suppliers, but that the failing company is missing the critical mass that other competitors have.
Npower has remained adamant not to buy consumers at a loss like other companies, wherein competitors offer negative-gross tariff margins that attract customers, which consequently led to the problematic situation Npower was already in before Eon’s asset swap.