One the biggest gas and electricity companies in the UK, Npower, is poised to announce around 2,500 job cuts both overseas and in the UK. The news will come after troubling times for the utilities giant, which saw it become embroiled in customer billing problems and a huge loss of customers.
The German-owned company has also been hit by the continued turmoil in global energy markets and is expected to inform its employees of the job losses after a string of weak financial performances.
The company could reveal this as soon as Tuesday when RWE, the company’s parent group, is due to post its most recent financial results.
Npower is one of the “big six” energy companies in the UK and has around 7,500 employees in the UK as well as a large overseas workforce. The last few years have seen the company close many of its UK offices along with outsourcing its customer services department to India. It is currently believed that some of the pending job cuts will be made from its overseas operations.
The company has not yet commented on the leaked news about job losses but the revelation will not come as a surprise to many people who have been expecting significant changes for quite some time.
Last month saw RWE cut its dividends after it reported losses in excess of £155m in 2015.
Back in the month of November, the chief financial officer of RWE, alluded to the possibility of selling the struggling Npower branch, whilst the group as a whole became increasingly strained by financial problems in several areas.
He also stated that Npower would most likely not return to profit until 2017. It is believed that the RWE shareholders are beginning to question whether or not the branch is worth keeping.
Npower have struggled to compete with new competitors such as First Utility and OVO, in addition to the continuous low level of wholesale electricity prices.
The leaked job cut plans drew anger from unions who were not pleased that the media had been informed before staff members themselves.
The national organiser for Unite’s energy sector, Kevin Coyne, said:
“We will be demanding urgent answers and assurances from npower over the coming days as we seek to protect as many jobs as possible,”
GMB released a statement saying that Npower are now the third large energy firm to announce sweeping job cuts in recent times after EDF and Centrica.
The spokesperson said:
“Many hardworking staff have already been outsourced and so any further job losses for directly and indirectly employed staff would be another kick in the teeth for deindustrialised communities,”
“It also makes a mockery of George Osborne’s rhetoric about a northern powerhouse if an energy company can’t maintain jobs in the north-east.”
The last year has seen RWE’s shares, which are traded on the Frankfurt stock exchange, more than half. Peter Terium, the chief executive, has said that stockholders were mainly frustrated by the billing mistakes at the energy company that have been embarrassing the firm for quite some time.
The mistakes have led to many households receiving numerous different bills for sums that do not match up to their meter readings.
Some other cases have seen incorrect names appearing on bills, others have not received bills at all or have had them delivered several months late. The lower level of UK energy consumption and higher grid costs have also damaged Npower’s performance.
RWE reported last August that Npower’s profits in the first six months of last year had dropped by around two-thirds- now sitting at £38m. The then boss, Paul Massara, quit that same month.
It was also reported in November that Npower had lost somewhere in the region of 200,000 customers in the UK since the beginning of 2015.
The company was also fined back in September for its mishandling of customers’ bills and also for not dealing with customer complaints within the maximum time limit- the fine totalled £26m. Ofgem, the regulator for gas and electricity markets in the UK, said that over half a million customers had been adversely affected by the company.
Back in November, Npower announced that it had entered into a franchise agreement with Powershop- an energy platform that allows customers to “play the energy market”. It is unclear if this deal will be affected if Npower is sold off by RWE.
Ari Sargent, the chief executive of Powershop, has said multiple times that the customer satisfaction records of the big six is “abysmal”. He believes that many of them are starting to lose their customer to smaller energy companies but that these energy companies are lacking in terms of new technology and innovation.
He went on to say:
“They[the big six] see declining market share from new entrant players, but there’s not the same level of innovation as what we see in New Zealand. There’s innovative sales approaches but not innovative service models.”
“There’s other players there with in excess of one million customers without having to do much innovation to be honest. They haven’t had to work particularly to get where they’ve got, so a disruption like what we’ve had in the New Zealand/Australia market should be pretty successful.”
“The players up there are competing on A, we’re not one of the big guys, or B, discounts, and I guess it’s a different level of competition we’ve got down in this part of the world, which is inevitably going to hit the UK at some point in time.”
Meridian released a statement, which said that the newly agreed franchise would allow Powershop to enter the UK market “without carrying wholesale energy market exposure”.
Mark Binns, the Meridian chief executive, said:
“The licensing deal gives Powershop the opportunity to sell the technology and know-how its team has developed, with no exposure to foreign wholesale energy markets and minimal capital outlay”.
It is understood that the potential returns were connected to how well the franchise performed in the UK market.
Sargent said:
“The remuneration is confidential but there is some skin in the game for scale, but there’s also a fixed component”.
It is fair to say that Powershop has seen great success in New Zealand. It received a customer satisfaction rating of 96% in both 2011 and 2012. It was also rated as the best electricity company in New Zealand by the Consumers’ Institute. The Ministry of Economic Development found that Powershop was the lowest priced electricity retailer in New Zealand.
However, it is unlikely that this deal will be enough to turn around Npower’s struggles on its own and it will do little to prevent the job cuts on the horizon.
