RWE, the German owner of npower, claimed today that it had finally made an acceptable profit in the UK for the first time since 2003.

The company, which entered the UK market in 2001, said that operating profit had climbed by 40 per cent to €724 million (£545 million) in 2007 up from €512 million.

RWE npower put its prices up by 17.2 per cent for gas and 12.7 per cent for electricity in January. It was quickly followed by four of the other five suppliers, including British Gas.

The figure shows that npower is making a remarkably similar level of profit to British Gas's residential business - which announced a £571 million profit yesterday - despite the company's having very different power generation portfolios and trading strategies.

The improvement at RWE npower came largely from the better performance at RWE npower's power stations, where the company has been investing heavily.

The retail business, which is the UK's fourth biggest energy supplier with a 14 per cent share of the residential market, had another difficult year as wholesale energy prices increased steadily from February 2007 by about 60 per cent.

The level of profits being made by energy suppliers has fuelled concern in the last two months, culminating in Ofgem's announcement yesterday that it would investigate the state of the market, with its conclusions expected in September.

A spokesman for RWE npower said: "We have great confidence in this market and will cooperate fully with Ofgem. If it helps to revive consumers' confidence then an investigation will be a good thing."

RWE, Germany's second biggest utility and the owner of RWE npower in the UK, has cut its dividend to shareholders by 10 per cent as it prepares to invest more than €30 billion (£22.6 billion) in the next four years on power stations and energy networks.

The dividend cut comes in contrast to British Gas-owner Centrica's 17 per cent increase yesterday. Centrica is also stepping up investment but expects to spend only £1 billion a year.

RWE, which was one of the first European utilities to begin investing outside its own borders, also signalled that it could be back on the acquisition trail. Its supervisory board has approved the possibility of further capital increases, which would enable the group to finance larger deals at short notice.

A significant proportion of the €30 billion investment that RWE is planning to make will be spent on renewable generation capacity with the company pledging to triple the installed base of wind farms and other renewable sources it already has.

RWE npower spent €587 million on capital expenditure up from €407 million spent in the previous year. Some of the money was spent on Staythorpe, in Lincolnshire, the new gas-fired power station the company began building last year and the introduction of flue gas desulphurisiation at Aberthaw, in South Wales.

RWE's coal fired power stations at Didcot and Tilbury will have to close by 2015. The construction of Staythorpe which will be completed in 2009, will cost more than RWE npower's entire UK profit in 2007.

Heavy investment in the UK is reflected across the company, where the group has said that it will spend €30 billion by 2012. RWE said that it would cut its dividend to shareholders by 10 per cent as it prepares to make such a large investment on power stations and energy networks.

The dividend cut comes in contrast to British Gas-owner Centrica's 17 per cent increase yesterday. Centrica is also stepping up investment but expects to spend only £1 billion a year.

RWE set out its strategy for the next four years as it revealed disappointing 2007 results.

The company, which owns power stations and networks across Germany, the UK and central and Eastern Europe, reported a 15 per cent increase in operating profits, up from €5.9 billion to €6.5 billion — slightly lower than analysts had expected.

Post-tax recurrent net income, which excludes discontinued operations and non-recurrent effects, rose by 21 per cent to €2.9 billion.

“The numbers were below both our and the market’s expectations,” said one analyst at a major European brokerage. “The company issued 2008 guidance, expecting sales to increase and operating profit at least at last year’s levels while the recurrent net should grow more than 10 per cent. That is really conservative,” a Frankfurt-based trader said.

RWE said that it would grow its recurrent net income figure by 5 to 10 per cent a year for the next four years.

It is looking to enter new markets with Turkey, where it has established a local company, and Greece high on its agenda. It is also considering options in Russia. It has also said that intends to reduce its CO2 emissions by nearly 40 million tons by 2012 and is proposing to double gas production in the same time frame.

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