Npower Profits Jump By 34% After Price Hikes

Energy (NYSEArca: JJE - news) firm Npower has sparked fresh anger after unveiling a 34% leap in profits for a year in which it hiked electricity and gas bills.

The company, which supplies more than six million customers in the UK, said profits rose to £313m in 2011, up from £232m the previous year.

Npower, which is owned by German utility giant RWE (Other OTC: RWNFF.PK - news) , lifted average tariffs for gas by 15.7% and electricity by 7.2% last October - but has since lowered gas bills by 5%.

The company said the surge in profits was driven by improved income from its power generation assets as well as higher cost savings.

It also invested nearly £1bn in clean energy in the UK.

Volker Beckers, RWE Npower chief executive, said the company recognised that many people are "concerned" about rising energy costs and Npower would invest in new energy infrastructure to reduce the UK's exposure to volatile energy prices.

But the profits announcement added further momentum to the consumer backlash against the UK's 'Big Six' energy companies at a time of rising fuel poverty.

Danny Jatania, Chairman and CEO of prepaid credit card providers Pockit, said: "The time has come to redress the balance; it is not acceptable to see energy companies announcing colossal profits while millions struggle to survive winter."

He called for the Government to scrap VAT on energy bills in the Budget later this month.

Npower, the fourth largest provider in the UK, blamed rising wholesale prices on the global market and a commitment to invest in future energy supplies when it hiked bills last year.

But the group said its 2011 profits amount to £4.17 a month per customer account and its bills remain below the current national average.

RWE's total investment in the UK since 2009 of £3.4bn is now more than Npower's combined £2bn profits since 2006.

The company recently invested £1bn in a gas-fired power station in Pembroke due to be commissioned in 2012 and £650m in a similar station in Staythorpe which became operational in 2011.

Mr Beckers added: "While doing everything we can to help our customers manage their energy costs and particularly support those that most need it, RWE has invested more in the UK over the last three years than npower has made in profit in the previous six."

Parent (Other OTC: KIDSQ.PK - news) company RWE reported an 18% drop in underlying earnings to £8.5bn euros (£7.1 bn) following the phasing out of nuclear power in Germany and losses in its energy trading and wholesale gas business.

British Gas, another of the 'Big Six' energy firms, saw its earnings for 2011 slide by 30% to £522m.