German energy group E.ON plans a \u00a3500mn ($642mn) break-up of the struggling British Npower division it inherited from Innogy, which a union said could put up to 4,500 jobs at risk.
\nThe revamp, the latest among established British retail power providers, effectively removes one of the market\u2019s so-called \u2018Big Six\u2019 players, which have lost customers to nimbler recent entrants and been hit by a regulatory price cap.
\nE.ON\u2019s plan includes managing Npower\u2019s residential and small and medium-size business customers on the same platform as its own, while putting Npower\u2019s industrial and commercial customers into a separate business.
\nThe rest of Npower will be closed.
\nE.ON chief executive Johannes Teyssen said the group would examine options for Npower\u2019s industrial and commercial business, the division\u2019s only profitable part, suggesting it might be sold at some point.
\nThe shake-up will result in up to 4,500 job losses at Npower, British union UNISON said, nearly 80% of the division\u2019s total staff.
\n\u201cThe UK market has been very challenging for several years,\u201d Teyssen said. \u201cChurn (customer switching) rates are high, margins slim, and the price caps introduced this year have exacerbated the situation.
\nNo company operating there has been spared these difficulties.\u201d
\nTeyssen said talks with British unions about the plans had started. Shares in E.ON were up 1.6% at 0951 GMT.
\n\u201cWe see this initial update as encouraging, given likely low market expectations around the outlook for Npower,\u201d Jefferies analysts wrote, keeping a \u201cbuy\u201d rating on E.ON stock.
\nNpower has been suffering more than its large rivals, including E.ON itself, Centrica\u2019s, SSE, EDF and Iberdrola, partly because of internal billing problems.
\nE.ON said it expected its combined British business to achieve at least 100mn pounds of earnings before interest and tax (EBIT) and positive free cash flow from 2022 onwards. E.ON took over Npower as part of a far-reaching asset swap with RWE that included the break up of Innogy.
\nThe deal, first announced in March 2018, has turned E.ON into a pure energy retail and networks group.
\nAs a result of the transaction, E.ON\u2019s net debt nearly doubled to \u20ac39.6bn ($43.7bn) at the end of September.
\nE.ON also said yesterday the deal had led it to raise its 2019 adjusted EBIT forecast to \u20ac3.1-3.3bn from 2.9-3.1bn.
\nIn the first nine months of the year, adjusted EBIT fell 6% at \u20ac2.2bn.<\/p>\n","protected":false},"excerpt":{"rendered":"
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