Utility Week

UTILITY WEEK | 22ND - 28TH MARCH 2019 | 15 This week Innogy considers its Npower options Customer exodus announcement caps unhappy year for German group's UK generator Innogy is considering "alterna- tive options" for Npower aer the planned merger of its subsidiary with SSE's retail arm collapsed in December. The company gave the update in its financial results for 2018, which revealed that Npower lost more than 650,000 customers over the course of the year. The number of gas and electricity customers on the com- pany's books fell by 293,000 to 1.64 million and 364,000 to 2.45 million respectively. Along with the higher costs of the smart meter roll- out, this led to a €9 million drop in adjusted earnings before interest and tax (EBIT), with a €72 million loss posted. Adjusted earnings before interest, tax, deprecia- tion and amortisation (EBITDA) plunged €54 million to a loss of €21 million on broadly level revenues of just under €7.1 billion. Innogy had to take a €1.5 billion write-down on the value of Npower as a result, partly in anticipation of Ofgem's market-wide price cap on default tariffs, which came into effect at the beginning of 2019. In late January, Npower announced plans to cut its workforce of more than 6,000 by 900. Innogy said that although "natural fluctuations" will account for many of the redundancies, the cost-cutting programme will incur short-term expenses amounting to tens of millions of euros, and warned that Npower is expecting "significant losses" for the current financial year. The supplier recently hiked its standard variable tariff by 10 per cent to reflect Ofgem's decision to raise the annual price cap by £117 from the beginning of April. TG ENERGY Eon profits slump as customers exit Eon has reported a profit drop in its UK retail arm aer losing 200,000 customers during 2018. Its 2018 financial results showed adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 32 per cent to €237 million. The fall came despite an 8 per cent rise in revenues to €7.76 billion as a result of higher gas sales (driven by cold weather) and higher power prices. Adjusted earnings before interest and tax (EBIT) shrank 43 per cent to €142 million owing to "persistently challenging market conditions, higher restructuring expenditures, regulatory effects and a weather-driven decline in power sales". The energy supplier ended 2018 with 6.8 million gas and electricity customers in the UK. ELECTRICITY Drax gets go-ahead for 299MW gas plant Drax has been granted a devel- opment consent order from busi- ness and energy secretary Greg Clark for a 299MW open-cycle gas turbine plant at Rookery South Pit, Bedfordshire. The £90 million Millbrook power station will take two years to build. Able to go from cold to full load in under 20 minutes, the facility will be used to pro- vide flexible backup generation during periods of high demand or low renewable output. It could be up and running by as soon as 2022. Drax Power chief executive Andy Koss said: "Rapid response gas power stations are agile enough to ramp up quickly and support the grid at times of peak demand, making them highly complementary to intermittent renewable sources of power, like wind and solar." WATER Outlook downgrade for water companies S&P Global Ratings has revised its outlook on Portsmouth Water and Northumbrian Water to negative aer the regulator placed both in the "slow track" category in its initial assessment of their PR19 business plans. The ratings agency said it expects both companies to come under pressure in the next regulatory period, AMP7, from 2020 to 2025. S&P believes Portsmouth Water's ratios will suffer from the company's commitment to reduce customers' bills while significantly increasing its planned capital expenditure. It sees Northumbrian Water's higher capital expenditure for AMP7 compared with AMP6 as hindering its ability to generate positive cashflow in AMP7. SSE-Npower merger failure blamed on price cap Finance & Investment Stock watch 9.9 9.8 9.7 9.6 9.5 9.4 EON SHARE PRICE, FIVE DAY 27 Feb 7 Mar 15 Mar EON SHARE PRICE, ONE MONTH Eon shares have taken a hit aer the German energy giant reported a decline in profits across both its UK retail business and the wider group during 2018. From a starting price of €9.82, the share price fell by more than 2 per cent on the day of the announcement (13 March) to €9.60. It remained at this level at the time of writing. At a group level, Eon forecast adjusted operating profit of €2.9-€3.1 billion for 2019 compared with €3 billion in 2018. 9.9 9.8 9.7 9.6 9.5 9.4 14 Mar 15 Mar 18 Mar 19 Mar euros euros

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