UK energy provider Npower is to cut up to 4,500 jobs as part of a significant shake-up that will include the closure of the majority of its sites.
Under plans announced on Friday, Eon, the German group that recently acquired Npower, will fold the lossmaking UK company’s domestic and small business customers into its own British business.
The revamp will cost £500m and is set to take place over the next two years. Eon declined to comment on the number of job losses involved but one person briefed on the plans confirmed about 4,500 jobs were targeted. The company’s call centres will be among the sites affected.
Dave Prentis, general secretary at the Unison union, said the moves were a “cruel blow” for employees.
“The UK energy market is in real danger of collapse. If nothing is done, there could soon be other casualties,” he said.
Johannes Teyssen, chief executive of Eon, said: “We’ve emphasised repeatedly that we’ll take all necessary action to return our business [in the UK] to consistent profitability. For this purpose, we’ve put together proposals and already begun discussing them with British unions.”
Eon acquired Npower as part of its landmark €43bn asset swap with fellow German energy major RWE.
As part of the complex deal, Eon agreed to buy Innogy, the RWE networks and renewables subsidiary that also owned Npower, and to pass on Innogy’s and its own renewables assets to RWE. Eon was already present in the UK: its British division and Npower are two of the country’s six biggest energy suppliers.
Npower’s industrial and commercial customers will continue to be served separately and will be carved out into a separate profitable unit. Npower has about 2.7m customers, including business customers, while Eon has 3.8m customers in the UK, a spokesman said.
Npower had started cutting jobs before the deal with Eon had been completed. It said at the start of the year that it would shed about 900 jobs in the UK — 15 per cent of its workforce — as market conditions in the energy sector worsened.
The Big Six energy suppliers in Britain have suffered in recent years from an influx of new competitors, which have been able to take advantage of their lower cost bases to offer cheaper deals to customers. A government-mandated price cap on energy bills for 11m households came into force at the start of this year, adding pressure to profit margins.
To add to the difficulties, the UK opposition Labour party has pledged to nationalise the supply arms of the Big Six if it were to gain power at next month’s general election.
The restructuring announcement came as Eon raised its earnings guidance for the full year, saying the loss of its renewables revenues would be more than compensated for by the overall contribution from the Innogy acquisition.
Eon said it expected full-year adjusted earnings before interest and tax to reach €3.1bn-€3.3bn and adjusted net income to stand at €1.45bn-€1.65bn. The group had previously forecast adjusted operating profit of €2.9bn-€3.1bn and adjusted net income of €1.4bn-€1.6bn. Eon reaffirmed its plan to pay a full-year dividend of €0.46 per share.