German giant RWE mulling £5bn sale of Npower

Gas and electricity giant Npower could be sold for up to £5 billion after its German parent company RWE put its future under review.

The group has hired investment bankers at Goldman Sachs to consider Npower’s future, according to a Sunday newspaper report, and the options on the table include putting the company up for auction.

Npower, which supplies energy to 6.8 million homes, was bought by RWE in 2002 for £3.1 billion. The company, which employs some 11,000 staff and generates 8 per cent of the UK’s electricity, last year made profits of £245 million on sales of £7bn.

RWE, the second largest power company in Germany, is understood to be mulling a sale because it wants to pay down some of its large debt mountain.

Its chief executive Jurgen Grossmann has pledged to sell billions of euros of assets as the company struggles against the rising cost of carbon taxes and debt repayments, which led one ratings agency to warn that profits could “materially decline”.

It also faces increasing costs of investing in green energy after the German government ordered the closure of its nuclear power plants in the next ten years following the Fukushima disaster in Japan.

RWE is also understood to be increasingly dissatisfied with British energy policy as the UK government prepares to unveil a new strategy designed to encourage more investment in nuclear power stations, wind farms and other low carbon technologies.

The sale of Npower could signal the start of a shake-up in the energy sector, which many analysts see as ripe for consolidation.

Iberdrola, the Spanish owner of ScottishPower, has already been tipped as a likely buyer. Stock market takeover chatter, meanwhile, has frequently surrounded Scottish & Southern Energy.

RWE’s troubles also raise questions about already delayed plans for a new fleet of nuclear power stations south of the Border. RWE and E.ON formed one of three consortiums behind plans for the plants.

However, sources have said that RWE could still invest in the nuclear power projects even if it sells Npower.

RWE and Npower declined to comment on yesterday’s report.