The group, which is one of the UK’s big six energy firms, blamed the decision on fierce competition in the sector and the government’s price cap on default tariffs.
Chief executive Paul Coffey said Npower would make significant losses this year even with the savings from the job cuts but the company is doing “everything we can to minimise them whilst continuing to focus on service and value for our customers”.
The energy price cap came into effect at the start of January and regulator, Ofcom, has said it expects it will save 11 million customers an average of £76 a year on their bills.
Many energy providers have slammed the move, including British Gas owner Centrica, which has warned it would cost the company £70mln in the first quarter. Several smaller energy firms have also collapsed since the cap was announced.
Ofcom is expected to announce next week that it will raise the level of the cap, which could add almost £100 to the annual bills of customers on default tariffs.
“Ofgem forecasts that five of the big six energy companies will make a loss or less than normal profits this year owing to the implementation of the price cap,” Coffey said.
“And with several recent failures of new energy suppliers, it is clear that many have been pricing at levels that are not sustainable.”
His remarks come after SSE called off a proposed merger of its retail arm with Npower, saying it was no longer in the best interests of its customers, employees or shareholders.
The deal fell through because the two companies failed to agree on how much capital to inject into the merged business.
The ownership of Npower will now be transferred to German energy giant E.ON and there are concerns this could lead to more job losses when the transaction is completed later this year.