(Press Association) Energy giant Innogy has booked a €480m (£428m) charge on utility provider NPower as it grapples with the commercial and regulatory pressures in the UK market.
The German firm said it was confronted by a “difficult situation” in the UK, driven by “very tough” competition, squeezed margins and a proposed move by the Government to cap poor value energy tariffs.
Merger with SSE
The hefty writedown comes as the Big Six energy firms look likely to become the Big Five after SSE and NPower announced last week that they had reached an agreement to merge their operations to create a new energy supplier in the UK.
However, Innogy said the deal would have no impact on the impairment charge.
The firm added: “The competitive landscape in the UK retail business remains very tough and pressure on margins is very high.
“The UK Government has initiated recently the legislative process to introduce a general price cap for standard variable tariffs and is proposing an expansion of the existing price cap for vulnerable households.
“As part of the annual impairment test, a goodwill impairment of €480m for the UK retail business was recognised. This impairment reflects the deterioration in commercial assumptions and tougher regulatory conditions.”
The comments came as part of Innogy’s results for the nine months ending in September, where it reported UK retail revenues had tumbled 17% to €4.99bn (£4.45bn).
Adjusted earnings for the group rose 5% to €3.1bn (£2.8bn) over the period, despite losses on UK earnings deepening to €33m (£29m), down from a loss of €6m (£5m) last year.
Innogy’s group revenues also dropped 2.1% to €30.79bn (£27.4bn) for the nine months.
Bernhard Gunther, Innogy’s chief financial officer (above), said: “The past nine months show that our earnings position has continued to show robust development.
“And we are making good progress, also in the UK. Despite the difficult situation on the UK market, Npower is a strong part of the planned combined retail company with SSE.”
Shares in Innogy on the Frankfurt Stock Exchange were down 0.74% in late morning trade at €40.97.
Picture courtesy of Innogy