Following the release of Innogy SE’s Q1 2019 results, Mohit Prasad, Project Manager for Power at GlobalData, a leading data and analytics company, offers his view:
“Innogy SE (Innogy) reported a one third fall in its profit at the end of Q1 2019 owing to its struggling retail business. The company reported a net income of €407 million against €610 million on a year-on-year basis. The earnings from the retail business fell by 40% from €423 million to €254 million. The UK retail business has been struggling in particular, contributing the most in the fall.
“With the introduction of standard variable tariff price caps in the UK, the company is expected to see its revenue coming from the segment move further southwards. The company lost 103,000 customers in Q1 in the UK which is also not augmenting well to its growth in the region. Apart from the UK market, the higher wholesale electricity and gas prices coupled with regulatory interventions in Eastern Europe can also put pressure on the income coming from the retail business.
“Tough competition amongst the big six*, emergence of smaller rivals offering cheaper deals along with the energy price cap means that utilities such as E.ON, EDF, British Gas etc. in the UK are struggling. The smaller suppliers have carved out significant market share from the big six.
“The big six held 99% of the domestic supply market in the final quarter of 2012, but that fell to 74% at the end of 2018, as over 60 rival suppliers emerged. The trend is expected to continue as commercial consumers have started to snap ties with the big six and have instead moved over to smaller players. This growing trend will continue to affect utilities such as Innogy’s retail business and as a result the market could undergo further consolidation.”
*Big Six – British Gas, EDF Energy, E.ON, Npower, ScottishPower, SSE