npower owner looks to axe thousands of jobs

THE owner of Midlands-based power company npower is considering axing more than 6,700 jobs across Europe over the next two years as it looks to claw back profits.

The BBC said German group RWE had distributed a letter to shareholders saying it intended to cut 6,750 jobs across Europe between 2014 and 2016 and reduce costs by another €1bn (£840m) as it looked to deal with low wholesale prices for energy and an increase in renewable capacity.

The proposals mean the firm could shed around 18% of its workforce.

There has been no breakdown for how the jobs might be lost.

In the UK, npower has around 6.5m residential gas and electricity accounts and employs around 10,000 people.

Its key sites are in Worcester, Oldbury, Solihull, Leeds and Sunderland. All five of its contact centres are based in the UK – three in Peterlee, one in Rainton Bridge (Sunderland) and one in Thornaby, Teeside.

In its outlook for 2014, RWE said that despite a difficult market environment, its operating result for the first three quarters of 2013 was more-or-less stable, at €4.6bn (£3.9m).

However, it said the stable development compared to the previous year was solely due to the one-off effect of the successful revision of the gas supply contract with Gazprom.

Peter Terium, CEO of RWE, said: “The group’s reduced earnings power, primarily in conventional electricity generation, will lead to a marked decline in the result for 2014. In response to this situation, the group will introduce further efficiency-enhancement measures to follow on from the current programme that will run to the end of 2014.

“We have identified additional measures to be implemented over the next four years, representing a gross volume of €1bn (£840m). Allowing for general cost increases, an earnings potential of at least €500m (£421m) is expected to come from these efficiency measures, which should be realised in full and in a sustainable manner from 2017 onwards.”

Frederik Dahlmann, an Assistant Professor of Global Energy at Warwick Business School said the development was in line with several recent announcements by major European utilities and demonstrated the large-scale changes occurring in Europe’s energy market.

“While some speak of industry transformation, there are others who believe a new industry is emerging altogether,” he said.
 
“The recent announcements about poor financial profits, resulting in restructuring efforts and efficiency programmes highlight the significance of major strategic planning mistakes and unforeseeable external events that are now causing severe headaches for the companies’ executives.”