* Npower no longer seen making operating profit in 2017
* Npower lost 211,000 customers in Q1
* Further efficiency measures being examined at business
* Strategic options also being assessed -Innogy CFO
* Innogy maintains full-year group outlook
(Adds detail on strategic options, impairments, CFO, analyst)
By Christoph Steitz
FRANKFURT, May 12 Innogy, Germany's
largest energy group, lost another 200,000 customers in Britain
and warned of further cost cuts at its Npower business, which is
no longer expected to make a profit this year because of growing
Smaller German rival E.ON this week also warned
of tougher conditions in the British retail market, where Prime
Minister Theresa May has pledged to cap household energy prices
if she is re-elected on June 8.
The industry argues that competition is increasing and that
a price cap could reverse that trend and choke off investment as
well as further erode already low margins.
Nowhere in mainland Europe was Innogy operating "in a
political climate remotely as hostile to utilities as the UK
is", Chief Financial Officer Bernhard Guenther told analysts on
Friday after presenting first-quarter results.
He added any price cap in Britain would be taken into
account in the company's next impairment test, suggesting that
Npower's book value could potentially be revised downwards.
Innogy said it was looking at a number of different options,
including strategic, for the business, which has been a headache
since billing problems and rapid customer losses first surfaced
Guenther told Reuters in late 2015 that an exit from Britain
could not be ruled out if a turnaround at Npower failed.
Npower accounts for less than 3 percent of Innogy's
operating profit but has become the group's single biggest
problem, leading to 2,400 job cuts, more than a fifth of the
total at the business.
"Further efficiency improving measures at Npower are being
examined," Innogy said.
Despite the problems at Npower, Innogy maintained its
full-year outlook. It expects adjusted EBIT of 2.9 billion
euros, adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) of about 4.4 billion and adjusted net
income of more than 1.2 billion.
During the first three months of the year, Npower lost
211,000 residential and commercial clients, a decrease of 4.3
percent, bringing their number down to 4.686 million, Innogy
said in e-mailed comments.
First-quarter adjusted earnings before interest and tax
(EBIT) at the unit plunged 74 percent to 34 million euros ($37
million), Innogy said, adding it no longer expected the business
to make a profit in 2017.
"The negative update on UK retail (Npower) raises a number
of questions on the ability of the company to weather even
rougher storms such as the proposed... price cap," Deepa
Venkateswaran, senior analyst at Bernstein, wrote.
($1 = 0.9200 euros)
(Editing by Georgina Prodhan and Keith Weir)