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Innogy continues course for energy transition amidst €480 million UK retail impairment

Innogy is doubling down on its vision for growth in decentralised generation and new grid infrastructure as it prepares to “rigorously implement” its new strategy.

However its performance has been beset by a significant €480 million goodwill impairment related to its continued travails in the UK retail market, as well as Brexit-induced currency drags and lower than forecast renewables generation.

The German power company reported 5% growth in its total EBITDA for the first nine months of 2017, rising to €3.1 billion, with growth in its grids and infrastructure division proving to be the main driver.

Adjusted EBIT from that business unit climbed by nearly 20% to €1.424 billion in the nine months ended 30 September, with innogy able to achieve lower expenses for the operation and maintenance of its German grids.

In September innogy outlined its so-called ‘4Ps’ strategy, detailing how it would now focus on position, performance, portfolio and partnerships in a bid to take the lead in the energy transition by 2025.

Within that announcement chief executive Peter Terium insisted that the firm would not be backward about spinning off any business unit that stood little chance of securing a leadership position, which could go some way to explain its decision to merge npower with SSE’s UK supply arm and list it on the stock exchange.

Today innogy stated that it would retain a minority share of 34.4% of the combined business, but also revealed a significant €480 million goodwill impairment – to be charged in Q3 2017 – which it said reflected a “deterioration in commercial assumptions” and possible further regulatory concerns.

Its UK businesses in general have also been hampered by “negative foreign exchange trends” throughout the course of 2017, with the GBP continuing to trade negatively against the Euro as Brexit discussions continue.

Innogy’s troubles within the UK supply market are well documented and have shown little sign of abating. Today’s results show a decline in UK retail earnings with the company bemoaning a “very tough competitive landscape” and “high pressure on margins”, with much of the ‘Big Six’ also experiencing difficult operating circumstances.

The same cannot be said however for innogy’s grid division which it is continuing to “modernise and expand”. Capital expenditure in its grids and infrastructure unit has risen 12% year-on-year  with innogy shifting its focus to increased decentralised generation connections and network expansion “in relation to the energy transition”.

Bernhard Günther, chief financial officer at innogy, said the group was “pulling out all the stops” to reach the “ambitious goals” it had set.

“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,” he added.