UK's energy sector could face npower struggle

MPs are warning that if the Germans sell npower, investment and competition in the energy sector could lose its spark...

by Dave Waller
Last Updated: 29 Mar 2012
Npower, one of the UK’s big six energy firms, is owned by German utility group RWE, which is mulling a £5bn sale in a bid to claw back some of its debts, currently standing at a not-inconsequential £24bn. For the company’s finance department, that must loom larger than a set of electrodes being waved towards sensitive areas.

If that wasn’t enough to have the company beating a hasty path towards the door, the final version of energy secretary Chris Huhne’s carbon-reform plan will be released later this month - and it’s expected to end up highlighting the billions of pounds of investment the Government requires for next-generation power stations. So that exit sign might start glowing even brighter.

Indeed, RWE is understood to have hired Goldman Sachs to conduct a strategic review of Npower, which it bought in 2002 for £3.1bn. The business employs 11,000 staff and generates 8% of the UK's electricity, and last year made profits of £245m on revenue of £7bn.

Not a bad place to be, but who’s going to buy it? If the suppliers already here are trying to get out, it may not prove a strong lure for potential suitors. ‘People have not accepted that companies may just decide to go to Asia and not invest in Western Europe,’ said Tim Yeo, chairman of the Energy and Climate Change Select Committee, who described the potential sale as ‘worrying’.

He’s not wrong. If Npower's rivals such as Iberdrola, the Spanish owner of Scottish Power, decided to take a punt, Britain's ‘big six’ could become a ‘big five’. And that’s not going to please the public, many of whom are already frazzled by the state of energy provision here.

Yeo said there has been a ‘lack of predictability’ in the Government’s policies, which aim to deliver up to £200bn of investment into nuclear power stations, wind farms and other forms of low-carbon power generation, not to mention the controversial plans for a tax on the emissions of fossil fuel plants. This should all become clearer when Huhne releases the finalised white paper later this month. As to whether RWE will still be plugged in to Npower in a few months' time, we’ll have to wait and see.

 

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today