E.ON could sell npower, one of UK’s largest electricity retailers for industrial users


Santander | E.ON is reportedly considering the sale of npower, one of the largest electricity traders serving industrial users in the United Kingdom. According to the article that reports this, Centrica and ScottishPower have announced in recent months their intention to exit from marketing to large corporate customers due to high price volatility and low margins.

Assessment: E.ON acquired npower from innogy in 2019 and subsequently transferred npower’s residential and small business customers to its own customer management platform. The corporate customer portfolio is now for sale. In our view, if the article is correct, the sale, if it materialises, is unlikely to be a significant cash inflow for E.ON (given the division’s low profitability), but would help mitigate earnings volatility from industrial contracts. E.ON would potentially be in a better position to exit the UK entirely by also selling its more profitable residential and SME portfolios, as it lacks natural hedging of UK power generation and could reallocate capital more profitably in other regions. This would reduce the weight of the riskier trading business in E.ON’s portfolio and boost its more stable and predictable regulated network business.

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