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Npower cuts 79% of UK workers in Eon restructure plan

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npower logo with briefcase

Just weeks before Christmas, 5,700 of staff at energy supplier Npower have been told that up to 4,500 of them, or 79% of the workforce, will soon be out of a job. Selectra has the details.

What has Npower decided?

Npower’s parent company Innogy and its German owner Eon have announced the devastating cuts along with proposals to restructure the Big Six supplier and return it to “consistent profitability” over the next two years.

The majority of Npower’s sites are set to close, possibly including its three call centres in Worcester, Houghton-le-Spring and Hull.

The move comes just months after Eon completed its takeover of Innogy in September.

Household customers and small businesses currently served by Npower employees will instead be taken care of by Eon’s own UK customer service staff.

tariff contract

Large industrial and commercial customers are considered profitable so Npower will continue doing business with them as usual.

The German group expects the restructuring to return “at least £100m” in profits by 2022.

In 2019, Npower lost around 447,000 customers and parent company Innogy expects an adjusted net income of just €400m (£338m).

The latest cull of workers follows a decision in February when 900 Npower workers lost their jobs, as the merger with Eon was being finalized.

Eon CEO Johannes Teyssen said the UK market was “currently particularly challenging.”

We’ve emphasized repeatedly that we’ll take all necessary action to return our business there to consistent profitability
Eon CEO Johannes Teyssen

Leonhard Birnbaum, Innogy CEO, acknowledged the news would be “bitter and surprising” for employees.

However, he said it had become clear that “Npower with its structural set-up and scale was not able to succeed by itself in this difficult market.”

“This was the driving force behind the attempt to merge with SSE’s retail business and it is the reason why these changes have been announced today.”

An attempted merger of SSE and Npower was abandoned last year.

The companies said they would work with unions and employee representatives to lessen the impact on staff and that current redundancy terms would be honoured.

Unison general secretary Dave Prentis said employees had suffered “a cruel blow.”

“They’ve been worried about their jobs for months. Now their worst fears have been realised, less than a month before Christmas,” he said.

Mr Prentis warned the UK energy market was “in real danger of collapse. If nothing is done, there could soon be other casualties.”

Since the start of 2018, 16 energy companies have ceased doing business.

“Npower’s demise means there’s no time to waste. It makes the powerful case for bringing the retail arms of the Big Six energy firms into public ownership,” Mr Prentis said.

“This would preserve jobs, ensure customers get a better deal and allow the UK to meet its carbon neutral targets.”

A statement from the energy union, GMB, called the announcement a “body blow to Npower workers across the UK.”

“The Government has to urgently wake up to the impact that the price cap is having on good and reasonably well-paid jobs in UK energy companies,” the statement said.

Npower is a poorly managed company with significant losses in the UK but it’s always the workers that face the brunt of poor management coupled with regulation that sends work overseas whilst sacking energy workers in the UK.
GMB Union

Eon’s CEO justified the decision to cut jobs and move both firms’ customers onto a shared IT platform run by Eon personnel as it would “make it possible to leverage considerable advantages, primarily in IT infrastructure and customer service.”

“This is based on leaner, increasingly digital processes that also improve the customer experience,” he promised.

“These restructuring measures will involve an expense of £500m. Taken together, Eon expects its combined UK business to deliver at least £100m in EBIT from 2022 onward and thus to generate positive free cash flow.”

The parent company of Npower and Innogy is in somewhat better financial shape.

tariff contract

According to the firm, Eon Group’s third-quarter earnings for 2019 were around 20 percent higher than the same quarter last year.

Eon CFO Marc Spieker said that the completion of the Innogy acquisition had led to an adjustment of its earnings forecast.

“We now expect the Eon Group’s 2019 adjusted EBIT to be between €3.1 and €3.3bn and its adjusted net income to be between €1.45 and €1.65bn,” he said.

“Previously, we’d anticipated adjusted EBIT of €2.9 to €3.1bn and adjusted net income of €1.4 to €1.6bn. We reaffirm our dividend proposal of €0.46 per share. The decline in earnings resulting from the disposal of substantially all of our renewables business will be more than offset by the new innogy segment’s earnings.”

Despite this, the firm reported that adjusted EBIT in the UK was also “significantly lower” than the previous year because of the regulatory price caps introduced in 2019.

The energy price cap is a maximum for how much your energy supplier can charge you per unit of electricity or gas.

What does this mean for Npower customers?

Commenting on the job losses and restructuring Leonhard Birnbaum, Innogy CEO, praised Npower’s “respectable record” in customer service, which may serve as a warning to Npower customers not to expect much improvement in how their energy supplier treats them.

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