Freezing temperatures lift Npower

Npower saw profits soar, while tariffs for customers also jumped
Npower saw profits soar, while tariffs for customers also jumped
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Energy supplier Npower has unveiled soaring profits after last year’s colder weather forced customers to fire up the heating.

The company, which courted public and political anger with a 9 per cent increase in energy tariffs in November, said profits jumped 25 per cent to £390 million in 2012.

Parent company RWE also revealed that it has decided to abandon the production of crude oil and natural gas and will consider options for selling its oil and gas division in a bid to improve its financial position by removing pressure on capital spending.

Chief executive Peter Terium said the group expected several interested parties for RWE Dea, which could fetch several billion euros and help to cut the group’s €33 billion (£28.5bn) debt pile.

UK revenues increased 29 per cent to £1.9bn following the price hike, but Npowersaid it was facing higher costs from government energy-saving schemes and network fees. It lost 70,000 customers last year but said its remaining 3.9 million used more energy during the freezing temperatures.

Npower’s profit haul comes after rivals Centrica and EDF also unveiled mammoth profits for 2012 amid prices hikes. British Gas and Scottish Gas owner Centrica revealed it made nearly £50 per household last year, while French-owned EDF posted a 7.5 per cent hike in profits.

Scott Byrom of comparison service Make It Cheaper said: “The reason why energy companies make profits at all is because so many of their customers are on bog standard tariffs when there are much cheaper ones to be had.”

Npower said electricity generation increased 47 per cent in 2012 compared with 2011 as new power station infrastructure, including its Pembroke gas plant, came online. Its Tilbury power station in Essex, which was converted to run solely on biomass, boosted earnings and helped it to increase the amount of electricity generated through renewable sources, despite a fire in February last year.

Npower chief executive Paul Massara said the group needed to be able to deliver a strong performance on the back of a major programme of investment in the UK.

He said: “We have invested billions in the UK, and although – at less than 5 per cent – our profit margin remains significantly lower than other FTSE businesses, we are now beginning to see the benefits of that investment as our mix of different power station technologies provide a reliable, efficient energy supply.”

Parent company RWE is involved in a number of major infrastructure projects in the UK, including the €2bn Gwynt y Môr wind farm off the coast of north Wales, in which it holds a 60 per cent stake.

The German group delivered a better-than-expected 10 per cent hike in profits to €6.4bn, on revenues 3 per cent higher at €53.2bn, but it warned it faced challenges from structural changes in the German energy market, which is shifting away from nuclear power towards more renewable and coal-fired generation.

Terium said: “We are a company that has to work hard for its future, and we will face the challenges created by the transformation of the German energy market.”